NEW YORK CITY—So long, Crumbs, yet another example of a fad gone fast.
Founded on the Upper West Side in 2003 by a former EVP at Douglas Elliman who sold it to a public company in 2011, Crumbs is credited with launching the cupcake craze. It expanded rapidly and at one point was expected to have some 200 locations by the end of this year. It adapted to current tastes, including creating a version of the cronut and even opening an exclusively gluten-free unit (which celiacs like me appreciated).
Sales rose, but so did losses, reports the Wall Street Journal. A new CEO came aboard to turn the company around, but to little avail. After achieving a high of about 75 stores, it began shuttering units, and as of its last day of operation, had 48 stores in 10 states. It failed to meet Nasdaq requirements and stock trading was suspended on July 1.
And therein lies the danger of expanding rapidly with a relatively inexpensive ($4.50) item. A number of years ago, sock stores were all the rage, opening everywhere including such pricey areas as Madison Avenue in midtown Manhattan. While Madison wasn't in the $2,500 per square foot rent range it is today, it certainly wasn't cheap, even for tiny stores. One day, employees came to work only to find the store locked and a sign saying they were out of business. (At least Crumbs told its employees during the workday.)
I called a leading local retail broker and the two of us went through the math. Based on the typical price of a pair of socks, a guesstimate of the rent, utilities and other charges, and salaries, that store would have needed to sell 5,000 pairs of socks per day to survive. Even in Midtown, that doesn't happen.
Cupcakes are a lot more expensive to produce than socks, and don't have the same shelf life. Because after a while, they just crumble.
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