Business | General

The icing is coming off Dubai cupcake stores

Saturated market offers limited scope for growth of start-up ventures

  • By Sarah Algethami, Staff Reporter
  • Published: 17:25 April 27, 2013
  • Gulf News

  • Image Credit: Clint Egbert/Gulf News
  • Cupcakes at Bloomsbury’s in Dubai Mall. The store offers cupcakes in 35 flavours, one of which is saffron, developed to bring in a particular customer segment.

Dubai: Dubai is home to a large number of cupcake businesses, which for years have seen rising demand for the sugary snack. But the cupcake craze may fall flat in the coming years.

“I worry that cupcakes have had their day,” said Colin Beaton, managing director at Limelight Creative Services, a boutique retail strategy and design firm in Dubai, adding that “demand will not see dramatic growth as it had in the last several years.”

The local cupcake industry may just be suffering from over-saturation. Beaton said the chances of survival for any start-ups are slim, given their limited marketing resources and other factors that help build business, he said.

“We rely mostly on word-of-mouth for our marketing,” said Nadia Bollal of Sweet Lane Cakes, a start-up selling cakes, cupcakes and cookies on Jumeirah Beach Road, with three other locations in Abu Dhabi.

There are around 10 brands selling cupcakes in Dubai and the competition is stiff as they vie to reel in customers. It has pushed businesses to find out new ways to stand apart from their rivals.

Winning formula

While, typically, a successful brand combines good quality products, services and customer experience, “it should also focus on two things to stand out: location and creating a unique differentiating factor,” Beaton added. Brands trying to determine their unique factor need to think about “how much they can innovate,” he said. Most local cupcake stores have a different environment and offer different product ranges and services.

Some stores are introducing different flavours to appeal to a certain market. Bloomsbury’s in Dubai Mall offers cupcakes in 35 flavours, one of which is saffron, developed to “bring in locals” to the store, said Vinay Lall, general manager at Bloomsbury’s.

Similarly, Hey Sugar Bakeshop, which has 14 stores in the UAE, introduced Middle Eastern kanafeh flavoured cupcakes during Ramadan last year. It proved to be such a success that it continued to stay on shelves even after the month ended, said Dana Jallad, the business’ co-founder.

While Hey Sugar Bakeshop benefits from offering a diverse range of cupcakes, it’s the quality and consistency of products that make them stand out, Jallad said. “It’s about keeping the taste the same. Whichever store you go to, the cupcakes are exactly the same everywhere,” she said.

Smaller stores often have the resources to capture a good location.

“There should be a balance between location costs and the benefits of other great locations,” Beaton said.

Prime location

Bloomsbury’s, a start-up based in Abu Dhabi, sees the benefits of its prime location in Dubai Mall. “Demand is based on mall traffic,” said Lall, adding that most store traffic is between Thursday and Saturday. Since opening the Dubai Mall branch in June 2012 until December, the store sold between 80,000 and 90,000 cupcakes, Lall said.

Most cupcake businesses in shopping malls are franchises, according to Beaton, which have better chances of getting prime locations because they have demonstrated that they are able to live up to the brand promise. Start-ups need to work on this factor, he said.

Once start-ups “have good control over operations, a great location, and a differentiating factor, they can start franchising,” he said. The process involves having at least 10 to 15 stores locally, and then finding international partners to expand the brand globally, he added.

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