Thursday, January 1, 2015

Harsh Reality For Cake Businesses For 2015, Part 3- What To Do And What To Watch Out For

Yesterday and the day before I posted about two factors that are changing the custom cake business. First was the market saturation that's driving prices down. Next was the lack of attention to what matters in running a business that a lot of decorators seem to be suffering from.

So for 2015, what happens to the people who do want to earn enough money to function in a market full of high supply and a bunch of "business" owners who will probably keep prices depressed for some time due to their lack of focus on actual business? They'll realize that they have two choices. The first would be...

Market Yourself Hard To The Right People.

If you have a product that you want to keep selling and you're not interested in changing focus, you'll need to think about your marketing. Decorators tend to spend way too much time marketing to the wrong people. If you sell custom wedding cakes to people in a ten-mile radius of your city, that's where you should focus your advertising. If you buy a small ad in a national magazine it might be impressive, but it might not be seen by as many of YOUR customers as an ad in a local wedding magazine might be.

If you sell supplies to other cake decorators, it doesn't make sense to buy that ad in the local wedding guide. You should be advertising to other cake decorators on sites where they hang out. Targeted ads on social media or cake forum websites are good options

If you sell supplies to DIY brides you should figure out where they go online and target those sites for your ad dollars. Buying ads on DIY blogs can be fairly inexpensive, so you can experiment a little to see what works.

It's simple but people get too wrapped up in overreaching and end up spreading their marketing efforts too thin. People who want to keep doing what they're doing need to ramp up their efforts to target their customer, not a bunch of people who will never buy from them.

It seems that over the past couple of years, though, many serous business owners have seen the writing on the wall and have decided that instead of fighting harder for every job, they prefer to...

Diversify And/Or Abandon the Sinking Ship Of the Cake Industry.

Whether you choose to restructure your business or just close it entirely obviously depends on a lot of factors. Some people won't be interested in really digging into the business side of things, which is what success in custom cakes is going to take in the foreseeable future. They might have made cakes for a long time and be feeling the physical side of it, or their area might not realistically be able to support a custom cake business anymore.

Regardless of the reason, I predict that we're going to see a lot of cake businesses closing in the next few years. Of course, this doesn't mean that there won't be a steady stream of "businesses" ready to open to offer lower-priced cakes, which is the unfortunate direction that pricing seems to be taking overall. Prices are dropping and the end isn't in sight yet.

Other people (myself included) will restructure their businesses. That usually includes some kind of diversification or an addition of services. I've seen people who swore that they would never do cupcakes start doing cupcakes. I've heard of people who will be adding items to their menus to better reflect the current buying situations in their specific areas. That's smart. Keep adapting to what's going on in your area, don't sit around waiting for things to change back to the way they never will be again.

And Now, a Warning.

With this diversification comes a horde of decorators and companies who don't sell cakes, but who sell to other decorators. There's nothing wrong with that, but it's similar to the flood of "consultants" who entered the wedding market in 2008 after the recession hit. They were all eager to tell other wedding businesses how to be successful even though they pretty much ended up as consultants because they couldn't sustain a successful wedding business during a recession.

The basic idea is "I can't make money selling cakes because there's too much out there. I'll make money teaching other people how to make cakes that they'll have a hard time selling because there's too much out there, but that's okay because I'll already have sold to them." It's the same concept as people who sell classes on how to do the elaborate, life-sized carved and cantilevered cakes that nobody ever really orders.

For 2015 and for the future, with so many people not selling cakes and getting into selling to other decorators through tutorials, classes, etc, you need to...

Consider The Source. If You Can.

Passive income is something you do once, then sell a million times with no effort on your part. This includes downloadable tutorials, ad income, online classes etc. Once it's posted and available for sale it takes little action on your part to maintain. You don't really make a lot from it (generally) but if it's your only form of income and you post enough downloads, you can.

A lot of people have already started including forms of passive income in their bag of tricks. Do you ever wonder why there are so many ads for Craftsy classes? Or why people do the lists of "My favorite things" on their blogs with links back to Amazon? It's because all of those links are affiliate links and they're getting paid when people click on them and buy something. They're supposed to disclose that they're getting paid in the post, but many don't. I participate in affiliate programs and I do disclose that since there are clear FTC rules about disclosing ads and paid endorsements.

When someone recommends an online class, check to see if they're an instructor for that platform, or an affiliate. If they are, chances are they're getting paid when people buy the class. It doesn't necessarily mean that the class is bad, but you have a right to know if someone is getting paid to advertise something or not. It's actually a legal requirement, and if they don't disclose it they're not being honest, so consider the source. Especially if someone just gushes about how great a class is, because I've watched a ton of online classes to review them and believe me, there aren't that many to gush about.

Online class platforms are increasingly common, too. There are five that I can think of off the top of my head. These platforms are relatively inexpensive to run and probably bring in a decent amount of money for the owners and instructors, many of whom seem to be decorators who aren't selling cakes, they're now selling classes. Here's a Forbes article about it from last year...the last sentence says it all. Why sell cakes if you can do a class for them and make money from residuals? Click here: Forbes article

Another thing that seems to be picking up steam are blogs, probably because of the passive ad revenue. I've been writing this business blog for more than 5 years (oh my God). Back then the "rules" for blogging were totally different. Things that mattered then don't even come into play now. People use today's blogs like advertising venues, and once again, you'd better consider the source. If you can, which isn't always possible because...

Shock of Shocks, People Who Are Selling Don't Always Tell You The Whole Story.

There's a woman who runs seminars about "online success" kind of junk, and I'd been reading her blog for a while. She gave pretty basic advice, then she decided that she was going to disclose her income like a few other bloggers do. Turns out she makes about 1/4 of what I do, which made me wonder why the heck I was reading her advice at all. I would never have known if she hadn't decided to tell how much she made.

Another blogger wrote to ask me if she could link to one of my articles. Of course I said sure, but I didn't intend for her to rewrite my article for her own blog without giving me any credit, which is what she did. Anyone reading that wouldn't have known that she essentially plagiarized my article and didn't come up with the information herself. This kind of thing seems to be happening more often these days, unfortunately. That "expert" you're reading might have hired someone to write their articles, or just poached the ideas from someone else.

Basically, blogs used to be about personal opinion or a topic of interest. Now they're more about making money from ads, product placement and converting readers to buyers. That in and of itself isn't terrible, but it's important (to me, at least) to know when I'm being sold to.

My point is that you should take things online with a grain of salt unless you know for sure that the person talking knows what they're talking about. If you want to know about home-based business ask me. If you want to know about running a storefront don't ask me, I don't have experience with that. If you want to know about gumpaste flowers ask Nic Lodge, don't ask someone who only works with buttercream.

So to sum it all up...In 2015 I predict we're going to see more bargain basement cake businesses pop up, more "rightly-priced" businesses close, online class platforms that sell classes continue to emerge,  more decorators selling to each other, and more people who need to watch out what they fall for. If you have any thoughts on any of this feel free to comment below.


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

2 comments:

Kate said...

If I ever need a reminder for why I continue to keep my cake decorating as a side hobby, I should just re-read these last few posts.

I really appreciate the fact that you addressed the FTC regulations and that many/most cake decorators are failing to disclose when they are making money on things. I am certainly not against people being compensated for their efforts, but I do think it is shady if you have a reputation as a generous cake decorator always sharing "free" tutorials when you are clearly making money off this content through blog advertising and page hits, affiliate links, etc and you aren't disclosing that fact.

Kara Buntin said...

Oops, I had written FCC, thanks for making me realize it was a typo!

Yes, there are clear regulations about promotional posts that most people are just ignoring. If they're an affiliate they can't claim that they're ignorant of it either, since affiliate websites make their expectations really clear when you sign up for them. Even if you're promoting a friend's tutorial you need to disclose that you're being compensated if you're getting a kickback from the endorsement. If you post a link that will result in you getting a payment if someone buys form it, it needs to be tagged with #ad #spon #sponsored or something that will indicate that. Some sites have more stringent rules than that,
too.

I don't have a problem with people making money this way, I participate in these programs myself, but I was having this conversation with my daughter the other day. She said that she was looking at makeup review videos on youtube to see what to buy, and we were talking about how you know whether the person reviewing the product was getting paid to do it. They're supposed to make it clear that they got the product for free, or that they're being paid, but a lot of them don't. They just tightened up the rules recently because a bunch of bloggers were endorsing products without telling people they were being paid to do it. It isn't always clear, but it's supposed to be so that people know if the endorsement has some $$$ behind it.