Groupon offer damages Mt. Airy market, but Internet helps bring it back

The Internet nearly killed Amy Kunkle's Philadelphia business when an ill-advised Groupon offer drove her thousands of dollars into a hole. But this week, the Internet also helped save it.

Kunkle owns Mount Airy's Food for All Market, a cafe and shop at 7127 Germantown Ave. Food for All serves a special niche: people wary of certain foods - nuts, soy, eggs, wheat, and others - that cause them allergic reactions.

It's a market Kunkle, 36, knows firsthand. She and her son Gabriel, 8, both carry emergency pens to inject themselves with epinephrine in case they react to an allergen. Her two daughters also have food allergies, though thankfully less severe.

"I always thought there should be a safe place to eat for people with food allergies," Kunkle said.

She opened Food for All in September 2010 and enjoyed modest success serving meals and selling hard-to-find products for allergy sufferers.

Then Groupon called. The deal-of-the-day site, an Internet sensation that has spawned hundreds of competitors, suggested a simple pitch that its salesperson said had worked for lots of other small businesses: sell a $30 coupon for $15.

It took only 48 hours to drive a stake into the heart of her fledgling business, Kunkle said in an interview. In just two days in mid-May, Groupon sold 450 of the $30 coupons on her behalf, good for purchases any time in the next three months.

By August, Kunkle realized her campaign had been a mistake. She had hoped the coupons would add to her regular clientele, and that people would spend more than the $30 coupon's face value.

"That's not what happened," she said. "It was really people in it for the deal who were not coming back."

Kunkle said Groupon's sales rep didn't mention that she could cap the number of coupons she sold, which would have at least stemmed her losses. (Groupon did not return phone calls Thursday.)

As she netted just $7.50 for each $30 coupon, after Groupon's cut, she figures her loss at close to $10,000.

That was enough to trigger a death spiral. She took out a high-interest loan in August to replenish depleted stock, and all through the fall robbed Peter to pay Paul. By early this month, she was ready to call it quits.

But then what the Internet took, it gave back.

Kunkle's only marketing effort before Groupon was an e-mail list with more than 500 names. Over the months, Food for All had acquired more than 400 followers on Twitter, and about 450 "likes" on Facebook. When she sent out word to her followers that Food for All was closing, they came to her rescue.

"About two dozen customers have basically made me low-interest loans, so that we can restructure our loans, restock, and move forward," she said.

Some have volunteered time and talent. A celiac disease sufferer who can't eat wheat products is now Kunkle's volunteer financial adviser. Others have offered to pitch in any way they can, even by helping scrub floors.

"Everything you can imagine," Kunkle said. "It's amazing." Thanks to their help, Food for All will reopen on Feb. 10.

Food for All isn't the only small business to suffer from a Groupon mistake. The best-known example may be the British cupcake bakery forced to hire extra workers to meet unexpected demand for 102,000 cupcakes.

Eric T. Bradlow, a marketing expert at the University of Pennsylvania's Wharton School, said Groupon and similar companies (Living Social, Dealster, and Philadelphia Media Network's Dealyo, for example) offer "a wonderful opportunity for customer acquisition." But businesses suffer if they don't weigh the potential costs and benefits.

Bradlow said one risk was that a business was selling beyond its capacity - "giving away products that other people would buy at full price, or outstripping your capacity to deliver products."

"The economics are never as simple as they appear on the surface," he said.

Nor, it seems, is the Internet.