Cake Central › Cake Forums › Cake Talk › Cake Decorating Business › Cupcake biz in decline, reports WSJ
New Posts  All Forums:Forum Nav:

Cupcake biz in decline, reports WSJ

post #1 of 16
Thread Starter 

http://money.msn.com/now/post.aspx?post=0fee4437-e105-4d47-a395-63f17f31faaa

post #2 of 16

Funny I had two different people send me this article and another similar article.  

post #3 of 16
It's not surprising considering supply is increasing and demand is fading. If you can differentiate your cupcakes from the competition you can still do well, as long as you target the right market. The comments after the article from people decrying the "greed" of businesses that charge $4/cupcake are telling of how most consumers undervalue quality products.
post #4 of 16
Thread Starter 

this is why i have stayed with a full line of products, as not to be caught flat footed.

post #5 of 16

Isn't it strange how nobody says "greed" about a $4 Starbucks?
 

post #6 of 16

The comments below the article are pretty telling.  Below I copy and pasted a comment that made me laugh out loud.

 

 

"$4 to $5 a cupcake ? $60 a doz.? If you told someone what flavors you liked, I bet Publix, Winn-Dixie, Kroger, Safeway, or any other supermarket bakery could make these & taste TWICE as good at half the price."

No his mind is not for rent, to any god or government...

Reply

No his mind is not for rent, to any god or government...

Reply
post #7 of 16
Quote:
Originally Posted by jason_kraft View Post

 The comments after the article from people decrying the "greed" of businesses that charge $4/cupcake are telling of how most consumers undervalue quality products.

Well, to be honest, every cupcake is not a quality product. I've had cupcakes from Crumbs and they were not special at all.

 

Also, at $4-$5, that is a huge mark-up for a cupcake when you consider economies of scale realized by retail cupcake places. It's business and there are different markets and different customers. Some people just aren't $4 cupcake people.**shrug**

post #8 of 16
Thread Starter 
Quote:
Originally Posted by bakediva View Post

Well, to be honest, every cupcake is not a quality product. I've had cupcakes from Crumbs and they were not special at all.

 

Also, at $4-$5, that is a huge mark-up for a cupcake when you consider economies of scale realized by retail cupcake places. It's business and there are different markets and different customers. Some people just aren't $4 cupcake people.**shrug**

 

I agree, and when I discussed this article with someone, I said that same thing. My market is flooded with cupcake exclusive bakeries and to be honest, I think poor quality is one reason for a lack of interest. We did a little tour of the top cupcakes in Orange County (as rated by the OC Register) and found them to be largely lacking in flavor and high quality ingredients. While I agree that having a beautiful store front and creative packaging can be important, cache can only carry you so far. You gotta have some substance and some service, as well. 

 

Jen

post #9 of 16

I've always thought cupcakes were a bit of a fad that would pass rather quickly. Honestly, I agree that $4-$5 for a cupcake is an insane price. They aren't labor intensive (seriously, what could be easier that piping a swirl of icing????) and I don't care what quality ingredients you use, that's a huge mark up for something that doesn't require anything more than the ability to bake a product that tastes good. I understand the need to price them high when you open a shop offering nothing but cupcakes, but then again, that's why the market can't last.

post #10 of 16
Quote:
Originally Posted by bakediva View Post

Also, at $4-$5, that is a huge mark-up for a cupcake when you consider economies of scale realized by retail cupcake places. It's business and there are different markets and different customers.
I doubt the markups are as big as you think they are. Check out the financials for Crumbs, for the past year they have a profit margin of negative 17.88%. There is a lot of overhead involved in running a standalone cupcake shop.

By comparison, Starbucks has a profit margin of 10.5%, so prices are not out of line compared with costs. A cup of coffee at SBUX costs $2, not $4.

http://finance.yahoo.com/q/ks?s=CRMB+Key+Statistics
http://finance.yahoo.com/q/ks?s=SBUX+Key+Statistics

Of course I agree that not all products at a higher price point are necessarily higher quality products, but at the aggregate level you can expect a superior product/service/experience when you spend more money.
post #11 of 16

i read through some of the comments underneath the article and was surprised by the intense hatred of cupcakes.....it almost seemed like they wanted to get together a lynch mob for anyone selling cupcakes.....smh....

post #12 of 16

My dad saved the article for my mom and I to read. While I agree about it being challenging to sell only cupcakes, I think the writer was fairly biased against cupcakes. I growled as his sentence about anyone being able to bake a cupcake. Well yea anyone can bake it, but can they bake it well. I pretty much stopped reading after that point. 

 

I also wan't thrilled with Crumbs (tasted the one in Calabasas, CA). They were way too big! 

Birthday Cakes
(6 photos)
  
Reply
Birthday Cakes
(6 photos)
  
Reply
post #13 of 16
The actual WSJ article is here:
http://online.wsj.com/article/SB10001424127887324345804578425291917117814.html?KEYWORDS=cupcake

I don't really see a bias in either the original article or the MSN Money summary.
post #14 of 16

I was disappointed when I tried my first Crumbs cupcake. And the Chicago store is so tiny, I can't see a place where they bake or decorate them so I'm not certain they are being baked fresh, at least not within a distance that would mean they could be shipped without having to be frozen. 

 

My personal theory is that it's tied to the economy picking up - when the economy was in the toilet people were turning to the $4 cupcakes as a treat, when they might have previously gone for the $400 purse or the $4,000 vacation. You can't do those big things anymore, but a $4 cupcake doesn't break the bank. Same thing goes for businesses - you can do $100 to buy cupcakes for the team, but not $100,000 to give them all a raise. Now that things are starting to get better it's time to spend on bigger things, and the little $4 luxuries start to seem frivolous. I know it seems kind of like backwards logic, but that's my theory. 

 

And yes the market is over-saturated - whereas before you maybe had to seek out a place to get that amazing cupcake that was only available in 3 cities, now you can just cross the street, and they charge 50c less. It takes away that novelty factor that made you blow $4 to see what is so special.

elsewhere.
Reply
elsewhere.
Reply
post #15 of 16
Quote:
Originally Posted by kikiandkyle View Post

My personal theory is that it's tied to the economy picking up - when the economy was in the toilet people were turning to the $4 cupcakes as a treat, when they might have previously gone for the $400 purse or the $4,000 vacation. You can't do those big things anymore, but a $4 cupcake doesn't break the bank. Same thing goes for businesses - you can do $100 to buy cupcakes for the team, but not $100,000 to give them all a raise. Now that things are starting to get better it's time to spend on bigger things, and the little $4 luxuries start to seem frivolous. I know it seems kind of like backwards logic, but that's my theory.

 

This is true.  In times of economic downturn, women spend their smaller amounts of discretionary income on small luxuries, like lipstick and nailpolish.  This phenomenon is a well documented part of consumer behavior.  Good catch!

 

Liz

Follow me on my Twitter handle: @Sugar_Iowa

Or on Facebook: https://www.facebook.com/SugarFineBakedGoodsAndConfections

Reply

Follow me on my Twitter handle: @Sugar_Iowa

Or on Facebook: https://www.facebook.com/SugarFineBakedGoodsAndConfections

Reply
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: Cake Decorating Business
Cake Central › Cake Forums › Cake Talk › Cake Decorating Business › Cupcake biz in decline, reports WSJ