Tuesday, July 8, 2014

Crumbs Crumbles

Here's a surprise.  Crumbs Bake Shop, which is credited with creating the cupcake boom when it opened in 2003, has closed all its stores and laid off its 800 employees.

Who could have expected that?

Just about anyone with any sense, I'd say.

By my count, Crumbs had 13 locations in Manhattan, an expensive place to do business.  One of them was located in the Union Square area, where the renowned Union Square Cafe (which sold much fancier and more expensive foods and alcoholic beverages) recently was shuttered because its rent had become uneconomic.

Cupcakes are fun, and Crumbs was a nice idea.  But a nice idea isn't necessary "scalable," to use the term of the moment, into a company.

People have been eating fewer sweets, and more people are deciding they want to go gluten-free.

Even if Crumbs offered non-gluten cupcakes, could it have expected to retain and build its customer base?

Weren't there a couple of cookie companies (Famous Amos, Mrs. Fields) that were fun for a while until they weren't?

One of the questions investors ask when a new idea is proposed is this:  Is this a product, or is it a company?

At best, in retrospect, I'd have to say cupcakes might be a product.   With as many working mothers as we have today, a Crumbs tray of cupcakes at the supermarket for the next day's school birthday party might have become a staple of after-work grocery runs.

As a long-term business on its own, it never made any sense.

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