Over the past couple of years, the popularity of gourmet cupcakes has absolutely amazed me. People have been willing to pay $4 and $5 for a cupcake, even though you can make one at home for pennies. There are even cable TV shows dedicated to baking the best cupcake. But buyer fascination with cupcakes seems to be waning, according to this Wall Street Journal piece, which looks at the fascinating way the marketplace works and its impact on one particularly high-profile, successful New York business.
As a business, making cupcakes has a relatively low barrier to entry and the field has become saturated with competitors, including individual bakeries, chains and grocery stores. Gigi’s Cupcakes USA, based in Nashville, Tenn., has opened 85 stores in 23 states since 2008 through its franchising system.
Crumbs rivals include people like Cynthia Hankerson, owner of the three-year-old Cupcake Salon in Jersey City, N.J. Sales at her bakery cafe are slipping and she said she suspects the cupcake fad may be waning. Last year, a typical Saturday brought in an average of $600 to $700 in sales for her signature cupcakes, which come in flavors like pistachio, amaretto vanilla and strawberry banana. But now “we’re lucky if we get $300,” she says. “People get tired of things,” the 42-year-old adds.
This is why I have such great respect for risk-takers and entrepreneurs.
