At 9:30 on Thursday morning, the line inside The Butchers in north Toronto is eight customers deep, and it isn’t getting any shorter. As soon as one person leaves, another enters.
Behind the counter, six employees in candy-striped smocks hustle to take orders, slice meat and cash customers out. They have been here since 8 a.m. and they won’t get a breather until the doors shut 12 hours later.
This pace is a new phenomenon. The Butchers has been selling organic meat in this neighbourhood for 10 years, but its customer base exploded in January after owner Marlon Pather experimented with his first online daily deal promotion, equivalent to what Groupon is famous for.
Satisfied with the results, he did a second deal, then another. Ultimately he partnered with Dealfind and set a North American record for the largest promotion by an independent store in a single city. For $55, customers could cash in on $175 worth of organic meat. The Butchers sold around 11,500 of those coupons, raking in $632,500 in three days, a sales total that has been eclipsed only by deals for The Gap and Amazon that were sold nationwide south of the border.
But with success comes skepticism. Earlier this week a more lucrative promotion priced at $99 for $400 worth of organic meat went up for sale, and now another at the same price is available until Saturday night. Foodie blogs across the city have questioned whether the promotion is too good to be true. They wonder: Could this be a Ponzi scheme? Is Mr. Pather a flight risk? Is the meat really organic?
Mr. Pather has seen the criticism, and he has no qualms addressing it. “I don’t make money on this deal,” he says while taking a quick break from serving behind the counter. Instead, he explains to customers that this isn’t a hoax, it’s a loss leader, and that all he needs to do is find people who buy a little bit more than what the promotion is worth. “If I have 10,000 vouchers, and everybody spent $1 more … I have $10,000.”
And that estimate is low, he says. Earlier this week, a customer who bought one of the first vouchers was down to the last few dollars on it and ended up spending $120 extra. If that keeps up, Mr. Pather says, 1,000 customers who each spend $100 extra puts $100,000 in his pocket. Plus, the promotion is applicable only to fresh meat and some frozen foods. If a customer wants tandoori chicken breasts or pistachio-curried marinades, they have to pay cash.
Then there’s the marketing potential. “What people don’t realize is every customer that’s come into my store, they write their e-mail address,” Mr. Pather says, noting that the same applies to all home deliveries. With such a robust database now at his fingertips, he could do a deal on his own in the future and keep all of the proceeds rather than paying a daily deal site for their mailing list and advertising reach. (These services can be costly. Behemoth Groupon is known for its 50/50 cut – 50 per cent of proceeds go to the merchant, the remaining 50 per cent go to Groupon.)
Still, $120 of free meat for 11,500 people in just one promotion alone puts Mr. Pather $1.4-million in the hole right off the bat. It also puts enormous pressure on his suppliers, raising the question of whether they can keep up with his demand.
“At first, my suppliers were a bit nervous,” Mr. Pather says, but he’s made it work – at least for the time being. It’s the payment schedules from the deal sites that have been the biggest problem to date. Typically, bigger partners like Groupon and Dealfind pay their merchants according to a fixed schedule. A portion of the proceeds is transferred seven days after the deal ends, a bit more 30 days out, and the remainder after 60 days. That puts a strain on someone like Mr. Pather, who needs cash flow to order big quantities of meat.
To cut himself some slack, Mr. Pather negotiated a quicker payment plan in his last two deals. But he says customers could also help by taking their time with the vouchers. The Butchers’ promotions are all valid for one year, but customers have been storming the shop. The rush has some bloggers worried that the promotions will force Mr. Pather to concoct one big Ponzi scheme, speculating that the only way Mr. Pather will have enough cash flow to keep buying more product is if he keeps making more deals to replenish his coffers.
Countering that, Mr. Pather says the current deal will be his last – at least for some time. He has also taken measures to assure people he poses no flight risk. Not only does he have a wife and a kid in Toronto, both of whom don’t want to abscond, but he announced plans to open a fish shop across the street from his current location.
Despite his assurances, the flurry of criticism bothered the owners of Buytopia, the daily deal site offering The Butchers’ latest promotion. On Wednesday alone, management got four calls questioning whether or not The Butchers’ meat was truly organic – a key selling point, considering that a sign hanging behind the shop’s meat counter reads “all of our beef is free run, antibiotic and hormone free.”
Buytopia did some investigating and called up some of the shop’s suppliers. One of them is Field Gate Organics, based in Zurich, Ont. (the two main others are Markham Quality Meats and Arcadian Farms). Over the phone, Buytopia found out that some skeptical daily deal hunters had already called Field Gate themselves, and Field Gate assured that their products are organic.
Still, the bloggers won’t give up. Trueler.com, which claims to disseminate “information about unfair business and people” has taken The Butchers head on, calling the deal a “scam” and conducting some unscientific tests, such as dotting iodine in some sausages to test whether or not they have a lot of starch, which may not be organic.
Despite the growing number of tweets questioning the deal’s validity, deal hunters continue to scoop the promotion up. This new breed of customer has caused a stir inside the shop. Some of them have shown up with two or three vouchers in their hands and wanted to use them all at once. When they are told they can’t, they scream at the staff, including the teenagers who work part-time on the weekends.
For a while, the whole scene was too chaotic, so Mr. Pather had to cease weekend redemptions. He also found a way to keep serving his local customers who have always come to him. The Butchers has an open window at the front of the store and the moms who stroll by towing their babies in red wagons, like they did on Thursday, can get served at the “walk-thru” window.
But some of the new customers are friendly. On Thursday, Suzanne Steinberg returned for yet another purchase through the promotion. She admits that she can’t vouch for the organic authenticity, but she also isn’t hung up on the issue.
Taste is more important to her, and she says she has a good palate for meat because her husband works for Sysco Foods and brings home all different kinds. She and her husband recently had steaks from The Butchers, and she happily says they were “probably two of the better steaks we’ve had.”