As the cupcake crumbles: Lessons from Crumbs' demise

Crumbs Bake Shop

A Crumbs Bake Shop sits empty after it was announced Crumbs is closing all its stores on July 8, 2014 in New York City. 

If only Crumbs had paid attention when fondue was a thing.

"Remember when we [were] all supposed to go eating fondue? "says Rita McGrath, a professor of strategy and innovation at the Columbia Business School. "I mean, in New York there must have been 20 fondue restaurants."

The reason we don’t see gaggles of fondue restaurants anymore? Because trying to build a lasting business on a temporarily popular item can be dangerous.

"People get bored, people get fat, people just want to move on to something else... and the question you have to ask is, 'Well, when the fad has run its course, what do you have to offer beyond that?'"

Adam Fleck, director of consumer equity research at Morningstar, says competition from other bakeries and other desserts meant trouble for Crumbs. Beyond fads and cake frosting, he notes, a company dependent on just one product is especially vulnerable.

"Consumer preferences can change on a dime," he says - which was especially troubling for Crumbs at a moment when kale chips and quinoa are what's for dinner.

“You know these cupcakes were very high calorie,” Fleck notes.

There are successful businesses that sell just one product. But most are in markets where it’s easy to predict demand - like steel. So, says J.P. Eggers, an assistant professor of management and organization at NYU’s Stern School of Business, “They are, in general, able to deeply understand what their customers are after, deliver what they want, how they want it, at the price that they want it.”

But there are plenty of stores that sell mostly cupcakes. Eggers says it’s unlikely they’ll all go away. He says when the cupcake bubble burst, Crumbs found itself with some odd store locations. Adam Fleck says the company expanded too quickly and got burned.

Which companies stand to learn from Crumbs' crumbling? We started brainstorming. 

Add to our list!:

The Cronut
Krispy Kreme
Rice Pudding (a thing in NYC for a little while)
Fro Yo
TiVo
Crocs
Sriracha
Gorilla glue

About the author

Sally Herships is a regular contributor to Marketplace.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...