Tuesday, December 30, 2014

Harsh Reality for Cake Businesses for 2015 Part 1

The business of making custom cakes has changed a lot in the past six years or so. When I started (in the olden days) there weren't that many businesses in my area that made custom cakes, and the ones that made wedding cakes were even more limited. If people wanted to get a wedding cake it was more normal to go to a storefront bakery and choose from a book of designs. Now, with the advent of cake tv, internet cake photos all day and night, cottage food laws, and the plethora of classes and tutorials available online, that has changed.

And it's not changing back.

There's More Supply Now...

For everyone who says "just wait, as soon as one of those businesses opens it will fail within 6 months" I have to ask this: What about the other ten businesses that open at the same time? While I'm waiting for them to fail they're each draining off one wedding cake from the available pool of customers on the market. That isn't good for the bottom line.

For everyone who says "there's enough business to go around" I have to ask if they understand supply and demand. If that statement confuses you, click here to read this: No There's Not.

Which Drives Prices Down...

All of this added supply on the market means that prices are going to be lower. Here's a photo from a facebook group, location to be left to the imagination. I assume that this kind of thing goes on all over:
Aside from the fact that I'd get two of the 3 for $1 brownies instead of the 6 for $3 deal, this is what we're now working against. It isn't price gouging, it isn't undercutting, it's a NORMAL RESULT OF TOO MUCH SUPPLY. Part of it is also ignorance of how to price items appropriately, but here's the thing...

You Can't Tell People What's An Appropriate Salary For Them.

I can yap all day about how to price a cake, but if someone thinks that making $3 an hour is okay FOR THEM, I'm not going to get anywhere. And for some people, $3 an hour is okay.

Now, all of this is good for the consumer because they can get baked goods at lower prices from a cottage baker who isn't making much of a profit. But guess what, they don't care. Click here for another blast from the past on this subject: They don't care.

Prices are lower now and if you want to charge what you need to charge you're going to find a smaller pool of customers who are willing to pay that. Which means that your marketing better be at the top of its game because that's what's going to keep your business fully booked.

So that's part of what's changed on the consumer end of it, but what about cake decorators themselves? Tune in tomorrow for that part of the puzzle.

Part 2: http://acaketorememberva.blogspot.com/2014/12/harsh-reality-for-cake-businesses-for_31.html

Part 3: http://acaketorememberva.blogspot.com/2015/01/harsh-reality-for-cake-businesses-for.html

Kara Buntin owns A Cake To Remember LLC,  online cake supplies at  www.acaketoremember.com and www.acaketoremember.etsy.com


Julie said...

Sad but true, and part of the reason why my non cake efforts, have been, and will likely continue, to get more attention.

I'm looking forward to Part II.

Kris Chinalski said...

I am changing my business model in 2015 because I have come to the very same conclusion. I am raising my minimum cake amount to $200 and going into production mode of scratch baked goods. I bought an old espresso stand building and will move my bakery into that and sell drive thru baked goods. With the amount of cake schools, tutorials and unlimited supplies out there I think even my dog could make cakes and sell now. What I am not seeing though are people that can actually BAKE without the help of Betty Crocker. So that's the niche I am hoping to fill. Gotta change with the times or be left behind!

Daniel Aseyev said...

There is a woman in my church who was making wedding cakes ( she quit this summer), she was charging $ 350.00 for 3 tier 16,12,8 inch cakes. Well she was doing this "business" for 14 years.And only after 14 year she realized that she doesn`t make any money she got burned out and doesn`t want to do it ever again in her life.

Kara Buntin said...

Daniel, it took her 14 years? Good lord...

Karen Bolick said...

I wish this wasn't true. Seems like no matter how hard we try to get other bakers to understand the importance of pricing, we are fighting a losing battle. The Ants Go Marching One By One, Hoorah, Hoorah!