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 Christina Lee/MEDILL

John Nicolaides, owner of Molly's Cupcakes in Lincoln Park, touches on the store's success amidst a difficult economic landscape and the story that inspired the business.

Cupcakes proves recession-proof, consumers reap benefits

by Christina Lee
Nov 12, 2009


Christina Lee/MEDILL

Molly's Cupcakes in Lincoln Park features gourmet cupcakes, like this chocolate raspberry center-filled treat.

At a time when many businesses are boarding up their storefronts, there is one business riding a sugar high. Sales are booming at cupcake boutiques in Chicago, and experts say the treats may be providing a boost in mental health.

“We’re definitely recession-proof. We’ve sold over 200,000 cupcakes this year and we sell out every night,” said Teresa Ging, owner of Sugar Bliss cake boutique in the Loop, who opened the retail store January after being solely online for two years before that. “We bake everything from scratch and bake everyday. With frosting--we don’t use corn syrup or shortening, which is a cheap way to make frosting. People talk about prices–if you’re going to buy a gourmet cupcake, you want the high quality stuff.” 

Consumer psychology research has found benefits that can result from taking a break during times of stress, perhaps for a cup of coffee or a cupcake.

“We have found that when people feel bad, like when the economy is not doing well, people try to feel better and little indulgences help them achieve that,” said University of Chicago Booth School of Business Marketing Professor Aparna Labroo, who studies consumer information processing. “People who can draw on their positive feelings can better cope with stress and adverse events. You can disconnect from immediate worries and it gives you a moment of respite so you can take in the big picture.”

Phoebe Walters and Kate McNamara helped open the first cupcake shop in Chicago, Cupcakes, which opened eight years ago after getting wind of a cupcake craze in New York City and in California. When Cupcake's owners decided to close the store last December, the two went out on their own. But where? The partners, also roommates and high school friends, found in marketing research that Chicagoans consume the most chocolates and sweets in the Midwest, so they stayed here and opened Phoebe’s Cupcakes LLC in Lakeview.

“It gets cold and depressing and you want something warm and homemade that makes you feel good,” said Walters. “It’s a self-contained piece of cake. If you buy a whole cake you feel like you waste it or have to eat it all.”

Since Phoebe’s opened in April, Walters placed the daily cupcake sales to range from 500 to 1,500, including catering and single cupcake sales at $2.50 each.

The gourmet elements and presentation have solidified a client base for these shops and possibly added a shield of immunity.

Like virtually all cupcake shops, the Sugar Bliss boutique offers specialty flavors, like orange creamsicle and pumpkin patch, and decorates the frosting in a sugar blossom. The individual morsels are $3.50 each and $1.50 for mini-cupcakes at this downtown store.

“Times are very hard and it’s a great place to come get a designer cupcake” said Pat Williams, a teacher at Phillips Academy High School on Chicago’s South Side, when picking up a pastry from Molly’s Cupcakes in Lincoln Park. “This is a way to relax and not necessarily stress about the economic times and yet get that little piece of luxury that didn’t cost you a lot. I love it.”

As for market saturation, some storeowners are unconcerned and even view more boutiques' opening favorably.

“Everytime a new cupcake place has opened, our sales have gone up,” said John Nicolaides, who owns Molly’s Cupcakes with his brother. “I’ve noticed it because four have opened since we opened and it’s always been positive for us. In some regard, I want another one to open so we can have more sales.”

Standing up to the test of time is another challenge.
“Hopefully these shops can figure out a way to keep reconnecting with consumers on how to make them happy,” said Professor Labroo. “Of course, I think sometimes there are strong loyalties to these kinds of products.”

To win repeat customers, owners strive for a welcoming staff, unique offerings and an environment to relax and enjoy the desserts.

“In the ‘90s when all the coffee shops opened, it killed bakeries because you could get a cup of coffee and pastry in that one spot,” said Walters. “The reason we continued on with cupcakes after our last place closed was because it’s what we do well and we think that having a bakery in the neighborhood is really important—to have a place to come in and get something baked fresh all day.”

The whimsy and delight of cupcakes provides an alternate career for a number of boutique owners. Ging of Sugar Bliss worked as a Wall Street stock analyst for six years before deciding to get a degree from Le Cordon Bleu’s pastry school in Paris.  Nicolaides, who named his store after his third-grade school teacher Molly because she baked cupcakes whenever a student had a birthday, said he was a creative director at large advertising agencies in New York City and Chicago, which he still does but not full-time.

As economic conditions remain trying, storeowners hope their presence offers some ease of mind in addition to an uplifting pastry.

“We wanted to enrich our community,” said Phoebe Walters. “With everything closing and storefronts having paper on the windows, we wanted to give a bit of hope. We opened at the height of recession. If we can do it then they can do it, and it’s nice walking down the street and smelling baked goods.”