Cupcakes and donuts: no longer just kiosks in shopping malls

DonutsThe recent announcement in the retail press that well-known US cupcake franchise Gigi’s is now offering nationwide shipping via their website led me to do some sleuthing in the rapidly growing gourmet dessert bakery retail space.

For clarity, dessert bakery includes products such as cupcakes, macarons, donuts, croissants and cronuts (or ‘dossants’ as Melbourne-based bakery Goldelucks dubs them, just to be different).

According to a November 2017 Daxue consulting report, the world’s top five dessert bakery markets are: 1. USA (by some distance), 2. China, 3. Japan, 4. Brazil and 5. Italy. Note that gelato and ice cream are not included as baked dessert goods, which means Italy’s inclusion in this list must be due to a lot of cannoli, biscotti and Florentines.

In the USA, the Magnolia Bakery chain (of TV’s Sex and the City fame) has been shipping its product nationwide for several years. Well regarded cupcake chain Sprinkles recently launched a 24/7 ‘Cupcake ATM’, effectively a vending machine with credit card payment serviced by a nearby baking premises. Sprinkles also offer click and collect, online ordering for shipping elsewhere such as for parties, and emailable giftcards.

In China, French pastries and bakeries are a hit and macarons are considered a luxury product. Whilst most western (US) bakery brands have only a handful of physical ‘dessert bars’ in Beijing and Shanghai despite moving into the market from 2012, macarons are the #1 ranked product in dessert searches on online retail marketplaces Taobao and Tmall. Holiland, the largest western style bakery chain in China, owns Black Swan Luxury Cake who provide online cake booking and payment services.

But it actually turns out that here in Australia we’re no slouches in the online dessert bakery space. A cursory Google search yielded a mixture of click and collect and home delivery cupcake and donut providers, some of whom include:

  • My Donut Box, billing themselves as Australia’s largest donut manufacturer and supplier, offers online ordering with next-day instore pickup

  • The aforementioned Goldelucks, who provide click and collect services. Their recent Donut Day, promoted on their Facebook page and other social media, provided a means of preordering with instore pickup

  • Grumpy Donuts provides on-demand donut delivery via Sherpa, currently limited hours (Wed-Fri 9am-3pm), but Saturday and Sunday deliveries are ‘coming soon’ according to their website

  • The Cupcake Factory provides free delivery in the Sydney CBD for online orders over $36, obviously targeting the corporate market.

Selling dessert baked goods online for pickup instore is effectively an extension of what wholesalers and manufacturers have been doing with the retail and catering restaurant and café trade, now extended to consumers.

It will be interesting to observe what happens in the dessert bakery space. In China, as the popularity of home baking increases, sales of kitchen appliances and accouterments on online retailer JD.com have skyrocketed. The USA’s largest cupcake chain, Crumbs Bake Shop, folded in 2016 due in part to the rise in competition from locally owned ma-and-pa cupcake shops and from supermarkets. Pop-up bakery and cupcake shops are rife on Pinterest, including advice on how to start a cupcake business. The rise of online retail for this category serves to increase competition further. Drone delivery, such as that Guzman Y Gomez are currently experimenting with, could also be a relevant delivery mechanism for this category.

Norrelle Goldring has 20 years experience in retail, category, channel and customer strategy, marketing and research, working in and with global retailers, manufacturers and research houses.

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