Is Ellen DeGeneres Our Next Big Celebrity Megabrand?


American Apparel Gains Stability
Via Hedge Fund
Charney's Future In Question


Why CRUMBS Got Swept Away

A bunch of new storefronts in highly desirable New York neighborhoods just became available as Crumbs, the cupcake focused bakery chain announced that yesterday would be its stores' last day of business.
Will you miss them?
Probably not, which is why they are gone today.
How could such a surefire business go under as smaller, more locally based chains like Magnolia Bakery continue to thrive?
There are many reasons that will be hashed over in the coming days. Let's get the ball rolling. 

1. Copycats never win.
Magnolia is still around because Magnolia is widely credited for starting the cupcake craze and retains  credibility with consumers. Love them or not, they remain the gold standard for trendy cupcakes. Customers still line up outside the Bleecker Street store for their simple, home style cupcakes and other unassuming but authentically homemade seeming baked goods. It feels like the real deal, even if it is now corporately owned. Crumbs was a Johnny-come-lately to the trend, and its offerings, by comparison, looked contrived and gimmicky. When Crumbs decided to jump on another trend with their knockoff Cronut, the Crumbnut, they were clearly doomed with an inferior product as anyone wh ever tasted one could tell.
We tried one.
It was terrible.

2. Overexpansion.
Magnolia has one branch on the Upper West Side.
Crumbs had three that we can think of off the top of our head —possibly more.
Nobody needed or wanted that many cupcakes, but the folks behind Crumbs felt that they could take the trend and turn it into a big business through sheer force of will and by blanketing the marketplace. Crumbs has been reported as having anywhere from 48 to nearly 70 branches in 10 to 12 states and Washington D.C. at the time of its shutdown. After going public in 2011, a NASDAQ  listing reached a peak of $13 per share, but recently closed at 30¢ before being de-listed entirely on July 1 triggering a default of $9.3 million in senior secured convertible tranche notes and $5.1 million in unsecured notes. The closing of unprofitable locations was already under way when the shuttering of the entire chain was announced

3. Poor Products & Service
Aside from the fanciful, jumbo-sized cupcakes, Crumbs' other products were nothing special. They were barely distinguishable from what you might find at your average coffee bar or deli. The muffins, cookies, brownies and other baked goods held no special qualities that would have suggested any great culinary talent behind the chain. It is debatable whether the elaborate decorations and flavor concepts like Girl Scout Cookie cupcakes actually made for a better cupcake or not. They might have been eye catching, and they were certainly more expensive at $3.50 to $4.50 each, but it seems that customers didn't come running back for more. What's more, the few times The Shophound ever went into Crumbs to buy something, we found inattentive workers behind the counters who seemed to be enjoying themselves at the expense of noticing if anyone was waiting to buy something —and these are not large stores. You really can't miss someone waiting at the counter to order.

There are plenty of news stories today leading with the pronouncement that the cupcake trend is over, but it's more complicated than that. Let's face it, everyone likes sweets. Any retail business has a better chance of succeeding with an original, well-made product presented with a high level of execution. From our observation, Crumbs failed on those counts. They seemed more interested in fast expansion to desirable retail locations than they were in creating a product that offered enduring appeal. "Location, location location" is a worthy mantra, but "Product, product, product" is one that no retailer can ever afford to forget.

Crumbs Bake Shop Closing Its Doors (Wall Street Journal)


The comments to this entry are closed.