Michael Adams Green Mountain Mustard and Gredio

Michael Adams, Owner
Green Mountain Mustard & Gredio

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Food Business Running Daily Deals

Are Daily Deals Profitable? Our Latest Campaign by the Numbers

I’ve written about daily deals before. But, it’s been three years since that post. (Sidenote: I’ve been writing this blog for three years!) For some reason, I think they’re great and still run them.

Yesterday, I finished packing orders for our latest deal on Wine.Woot.com. It’s a subsection of Woot.com (the granddaddy of daily deals).

We ran a week-long deal for six jars of mustard. It was available for $34.99 with shipping. (Here’s our sales page if you’re curious). I limited the deal to 50 people. That meant I only had 50 six-packs available to buy.

We sold 24 six-packs. Here’s how the numbers played out:

Total Sales: $839.76
GMM’s Cut: $431.76 ($17.99/pack)

Calculating the Cost of Goods for each shipment:

Six jars of mustard: $8.94
Six pieces of bubble wrap: $0.60
Packing Peanuts: $0.05
Shipping Box: $1.35
Fragile Sticker: $0.03

Total Cost of Each Shipment: $10.97

So, let’s get back to the total then:

Revenue for GMM: $431.76 (100%)
COGS (all packages): $263.28 (61%)
NPM on the sale: $168.48 (39%)

The margin isn’t awful — pretty much distributor margins here. But, I’m not taking into account the 4 hours it took to put the packages together. Note, that I’m also counting the time it takes to bring the packages to FedEx since they won’t pick up at our house.

Luckily, I wasn’t paying someone to pack the boxes. If I was, we’d be looking at about $110.00 in profit (with those pesky payroll taxes thrown in).

For 4 hours of work, I made $42.12/hour — not too bad if you ask me! If only that happened 40 hours a week. Am I right?

Would I do it again?

Maybe. I could have sold those same jars of mustard direct to the consumer over the next 3 months. Then, the financials would have looked something like this:

Revenue for GMM: $864 (100%) – 12 cases of mustard for $72 each.
COGS: $263.28 (30.5%)
NPM: $600.72 (69.5%)
OPEX: $250 for a festival (hotel, show fee, etc) (28.94%)
NPM: $350.72 (40.59%)

Now, one would look at the numbers and say, “it’s the same margin, isn’t it?”

No. The big difference here is the number of hours I would have invested in this event. If you count drive time and show time, a typical one-day show is 12 hours. At that rate, I’m racking in $29.23 / hour. Here’s another scenario: If those jars sold at a farmer’s market, my NPM would be $565.72 and my profit per hour would be $56.57 / hour. #lovefarmersmarkets

You could also argue that daily deals are a great way to get your brand out there exposed to customers. If you looked at it that way, I gained 24 customers (and hundreds from brand awareness) for $263.28 (my product cost). That’s $10.97 / customer. Fantastic if that customer buys from me again. And even more fantastic that I profited off of gaining new customers who might buy from me again.

The lessons are the same as in the article I wrote on daily deals three years ago.

Ultimately, you have to decide….

What is the value of your time?

It’s something I’ve been struggling with. My time isn’t too valuable when I’m spending every Saturday at the farmer’s market. Or, traveling the Northeast to different shows. But, the immediate cash influx you can get from doing events outweighs the time spent. Granted, not every farmer’s market is a guaranteed $800.

This is the same lesson my family and I learned when we were doing 30 festivals every year. You need shows that generate revenue in the thousands to make them worth it. That’s why we stick to the farmer’s market and a handful of events. This makes up almost 80% of our net profit from events. The other shows boosted revenue, but showed dismal profits.

Daily deals, in this case, supplement our income from other revenue streams. It’s fun to take part in a daily deal, but I would not make them a central part of my sales plan.

How have you fared with daily deals? Wild success or epic fail? Let me know in the comments below.

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2 Comments on this post

  1. AUTHORDenise Edwards

    on October 7, 2016 at 6:58 pm - Reply

    Hi Michael,
    Love all your posts! I did the same, I decided to take a serious look at the events I was signing up for. I made better choices this year, went to fewer events and made more money. There are too many costly events that are poorly planned. So I encourage vendors to choose wisely.

    • AUTHORmichael

      on October 12, 2016 at 12:21 pm - Reply

      Hi Denise,

      Yes – it makes a lot of sense. Glad you’re making more money with less effort 🙂

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