Jul 13, 2009

Learning From Donut Wars!

Recently, a new shop was opening near me. They had painted a website on the paper-covered windows intended to create an air of mystery. They had a big contest at their site about "what are we?" To me, the website totally sounded like a cupcake shop. They had a Facebook page with the same contest and to many others, it sounded like a cupcake shop. In fact, the hints they were giving made it sound like it was a cupcake shop where you could go in, choose your cupcake flavor and have it custom-frosted for you. It would have been a FABULOUS idea for two reasons:
  1. There are no cupcake shops in this whole area. Cupcakes are HOT right now, but few places are selling them here beyond what you can get in a plastic clamshell with nasty Crisco frosting.
  2. This is an upscale upper-middle class shopping area and people would have totally bought into the upscale idea of serving cupcakes at Birthday parties, showers, etc.
But, alas, the place turned out to be a DONUT shop. Which, did not fit the website name in my opinion. The URL sounded like more cake than donut.

So, my kids and I decided to check it out and see if the donuts lived up to the hype so we wandered over there the first day of their Grand Opening. We showed up in the afternoon - wondering if there would be any donuts left. But, given the fact that they stay open until 10pm, I assumed they would be making donuts all day long. There was not much of a line if you don't count the busload of elderly people who arrived just 30 second before us and took most of the afternoon to order.

I bought 4 donuts - two chocolate frosted custard filled, one german chocolate with coconut-pecan frosting and one Maple Bar. My total for 4 very average donuts was over $8. They put them in a brown box with a cutesty label on it that was sort of meant to be "signature" packaging since pink and brown are their signature colors. I think I paid $4 just for the packaging alone because what we got was 4 donuts I could have bought across the street at the grocery store for less than $4. And, to top it all off, my kids didn't get any custard in their donuts until the last 2 bites. They had skimped on the filling.

The next day was the annual 5K Race and festival in this area. We happened to park near this donut shop when we arrived about 7:45 am for the race. This was the second day of this shop being open and I kept an eye on the foot traffic as I sat in the car waiting about 90 minutes for the race to start. I didn't notice a lot of people going in and out. It was surprising given all the hype.

My husband went to warm up for the race and came back with a postcard he handed to me. Apparently, the book store at the other end of the parking lot just opened a branch of a very famous donut shop from Seattle where they had previously had a coffee shop. They were handing out postcards for free donuts. So, after the race, we went and got 4 donuts. We didn't use our postcard and paid $6 for 4 donuts. Still too high in my opinion, but they were much better than the other place and they had the "brand name" behind them as well as features on the Travel Channel and the Food Network. I immediately thought, DONUT WAR!!! You can't tell me that the legendary donut shop isn't going to throw their name and reputation around against this upstart across the parking lot. It will be interesting to watch.

So, what's the lesson here? First, if I was doing a big "what are we?" promotion and everyone kept guessing I was a cupcake shop and they were EXCITED about the fact that a cupcake shop MIGHT be opening in our area - I honestly might have taken a step back and thought about changing my plans. Listen to your customers! People were THRILLED with the idea that it might be a cupcake shop. How many, including myself, were disappointed to find out it wasn't?

Second, I can get donuts at 5 grocery stores and this other new "legendary" Seattle-based donut place all within about a 10-15 minute walk from this donut shop. And, none of them are going to charge me $2 for a custard filled donut. Actually, this new shop sits in the middle of a parking lot between the high-end (similar to Whole Foods) market with lots of donut and pastry choices and the legendary donut place in the bookstore. So, it's literally one of three choices from one parking lot.

How many places can I get cupcakes? ZERO. Okay, I can get them at the grocery store, but they are prepackaged - nothing custom. How many times will I pay over $2 for a donut? Never again. I can't believe that I'm alone in that thought, either. The donuts weren't bad, but they weren't the best I've ever had, either. Perhaps they will develop their donut menu over time to include outrageous things like a bacon-maple bar you can get at VooDoo Donuts in Portland. But for now, they are just a cute donut place selling donuts and I hope they can stand out in the crowd enough to make people want to pay the high price of their donuts.

The scrapbook industry lesson is similar. You need to really evaluate how many other places around you are selling what you sell and try to figure out something of value to the customer that sets you apart from the others. Cute packaging isn't enough anymore. People want VALUE and UNIQUENESS. If you find yourself among lots of others doing the same as you, find that thing that makes you unique! Do you provide better customer service? Have unusually themed crops? Have custom papers for the local area? Stay open later? Can provide lots of "fan comments" about your store that will make others want to come check it out? What's your "hook" that will make people choose you over someone else? It's got to be more than cute colors and decent donuts - especially decent donuts that are higher priced than other decent donuts in the area.

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