OnLive was a frequent customer or Prolific Oven Bakery in Palo Alto, said Regina Chan, daughter of the owner of the local chain. By the time the company went through its insolvency in August, it owed the bakery $2,000, which represented about a month's worth of Onlive's orders, she said.
Although they might have lost $2K on cupcakes, but the amount of money they would have made by attracting customers on credit is huge.
So generally offering things on credit is like bait to catch customers, there is risk I agree. But profits from such schemes vastly exceed losses, to make them almost negligible.
Lets say you own a bakery, you sell cupcakes on credit. Say you sell $40K worth cupcakes an year to a company. There are chances that you may go under a loss of $2K if the company folds. Will you go for it, or do not offer any credit and lose $40K worth cupcake businesses to somebody else?
Doesn't this depend on your profit margin, which I suspect is larger for cupcakes than muffins... If you sell $40k of cupcakes that cost $39.5k to make, credit risk is much more of an issue than if they cost $20k to make.
Agreed, but generally there is an opportunity cost associated with any risk.
You just have to decide if you are ready to lose the opportunity if you don't want to take the risk. I know it sounds unfair, but unfortunately that is how things work in the real world.
If there was no risk associated with opportunities, then the number of people who be would competing for an opportunity will go up by a large number. Nature puts filters to keep the size of the game limited.
I would have disliked it more if it was the original owners, once Ms. Chan bought it the quality of the cakes suffered, especially in the Saratoga store. It went from being my 'go to' place for a delicious chocolate on chocolate cake to 'I've not been there for like 3 years now.'
Come on - your local bakery (even if it's a chain, even if you don't like it as much as you used to) is a low-margin enterprise. Getting screwed out of thousands of dollars is tough on places like that.
Plus that was just the example. If they were net-30 on the break room food, it's a safe bet a bunch of freelancers and other local businesses also had losses.
OnLive was a frequent customer or Prolific Oven Bakery in Palo Alto, said Regina Chan, daughter of the owner of the local chain. By the time the company went through its insolvency in August, it owed the bakery $2,000, which represented about a month's worth of Onlive's orders, she said.