Competitive Analysis and Positioning

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Competitive Analysis and Positioning

Assessing the level of competition in Chicago

The business of interest in this paper is the bakery industry with a focus on cupcakes business. The Bakery business comprises of companies which produce flour-based in an oven site for immediate consumption. The typical products in this industry are, breads, pastries, pies, bagels, cakes, cupcakes, and other complementary products such as salads and sandwiches (Martínez-Monzó et al., 2013). The business picked for analysis is Sprinkles Cupcakes ATM in Chicago. The competition in the business is medium with several established competitors running the market too.

In Chicago, the revenue from the bakery Industry has been growing moderately for the last five years. However, the growth declined in 2020 due to the COVID-19 pandemic due to the fall in demand for food away from home. The fall in demand and the existence of high fixed costs such as rent have also contributed to the decline of entrants into the business. Some of the small enterprise bakeries and bakery cafes also closed off to COVID-19 (Chen et al., 2015). This could have been attributed to a fall in disposable income within the city. However, in the last months of 2020 there has been a rebound from 2020. The business which experienced a great hit were the cakes, and the pies considered as ‘luxurious’ in the baking industry (Kolak et al., 2018). Many people in Chicago chose to forego these products opting to buy bread and bagels for breakfast since they were bulkier and affordable with the reduced income. Many of the stand-alone bakeries and bakery cafes existed the market as a result.

There has been an improvement in the production systems of most bakeries leading to greater flexibility, increased productivity, and an increase in the variety of products sold. Automation especially the use of robotics in bakeries has been gaining traction in Chicago. The business is currently selling a limited variety of cupcakes due to the delivery method used in the ATMs. Competitors using automation, offering home delivery in their products in cafes, and those introducing new varieties of cakes are likely to have a wider customer base. These will negatively affect the demand of the brand’s business. There has been a reduced demand in the ATM cupcakes since most people preferred staying at home and prefer home delivery. This denies the brand its competitive edge.

Positioning Strategy

Sprinkles Cupcakes ATM Chicago can be described as market leader in the baking industry with a specific focus on the cupcakes. The company boast of being the only world’s cupcake bakery operating an ATM 24 hours and serving fresh cupcakes all through. The brand relies on consumer convenience and the technological awe that comes with such a magnificent innovation. The innovation has been able to attract a lot of media traffic, both social and mainstream media delivering free marketing for the company.

The company market segment majorly consist of young people between the age-range of 16 to 35 years. Majority in these group are students or pursuing lucrative careers especially in the corporate world. These are people who are constantly in a hurry to get things done due to their high workload. However, having some quick cupcakes early in the morning to work or school or during the day between breaks suits them well. The other consumer segment involves people on rush and in need of something to eat during odd hours. This can be informed by the geographical location of the ATM at Walton Street. The product pricing is higher due to the perceived value and convenience. The ATM cupcakes cost around $4.5 which is almost double the price of an average cupcake which is $2.5. The brand focuses on offering a luxurious consumer experience. This is supported by the positioning of other outlets of the brand in areas such as Beverly Hills, and prime locations in Atlanta, Dallas, and Las Vegas.

Analyzing direct and indirect competitors

The major forces of competition in the business arise from direct competition from other brands, threat of substitute products or services, threats of new entrants, and the bargaining powers of the buyers. The direct competition comes from several established bakery cafes that have been selling cupcakes. These cafes enjoy a loyal customer base. They have various baked options and keep their menu flexible.

In close substitutes, the business has been experiencing an increase in competition from products such as bread, and pastries since the onset of COVID-19. The products have well penetrated distribution networks and therefore are easily accessible to consumers. They are considered ‘essential’ especially in breakfast. In situations of limited disposable income, they are given priority over cupcakes. These products are majorly produced by large corporations with economies of scale and capable of easily adjusting the prices of their products in relation the market forces

The threat of new entrants into the business is minimal at the moment. Due to the recession experienced in the country as a result of COVID-19, potential new players have not been very willing to risk large capital investments required in setting up baking industries. However, there are future threats lingering. There is an ongoing shift of consumers towards healthy baked options such as gluten free, lower caloric, and low sugar items. The ever growing health campaign on consumption of these products could probably lead to a market shift. This will have serious effects on the business since most cupcakes have high sugar content. It is therefore necessary the brand begins to develop products that are more health aligned to remain relevant.

Direct and indirect competitors

Names Types of services Operating statistics Price points Primary customer base
Molly’s Cupcakes They offer cupcakes Casual dining restaurants.

Offer delivery and pick-up services.

Have 5 locations in Chicago

Bakery hours are majorly during the day between 8.00am – 10..00 pm

The price of the cupcakes average between $2.5 to $3 Young people and anyone out to eat something luxurious such as during a treat or date.
Lickety-Split Cupcakes They offer cupcakes Casual dining restaurants.

Offer delivery and pick-up services.

The price of the cupcakes average between $2.5 to $3 Young people and anyone out to eat something luxurious.
Sweet Mandy B’s Offer cakes for special occasions, weddings, and holidays.

They offer cupcakes.

One of the stations offers cut out cookies.

Have two locations; Lincoln Park and Streeterville The price of the cupcakes average between $2.5 to $3 Have products packaged for different consumer categories. These include younger kids, older kids, adults, special occasions, holiday, and events.
Alpha Baking Company The company offers fresh, frozen, and retail bakery products of all kinds.

The major product offered is bread

Their distribution services cover many areas in Chicago.

Offer distribution and retail services.

Offer direct consumer home deliveries

Price depends on the type of bread.

Price of bread. Ranges between $2to $3

The family in context of ‘bread for breakfast’
Hewn Bread The company provides bread baked through traditional systems such as stone milled. Uses organic flour and grains.

Also offers pastries, sandwiches and coffee

Both online pre-order pick up and same day walk in sales.

Hours for walk in sales are Tuesday through Friday, 7am-5pm; Saturday & Sunday, 7am-3pm. Closed Mondays

Price of bread. Ranges between $4to $10 Target consumers sensitive about their healthcare and those with a conservational attitude on their bakery products.
Aya Pastry Breads, cakes and pastries Pre-Ordered Online For Pickup Price of bread. ranges between $2to $3 The family in context of ‘bread for breakfast’
Tel-Aviv Kosher Bakery Sells challah, sweet rolls, rugelach and babka.

Focuses on breads with a Jewish origin

Offer home delivery.

Have pre-order pickup services.

Price of bread. Ranges between $10to $20 per product Targets consumers interested in exotic bakery products from different ethnicities especially of Jewish origin
Bang Bang Pie Shop Focuses on pies. Well positioned in providing key lime pies.

Has biscuit sandwiches, pot pies.

Provides catering events for pies but since 2020, onsite private events were cancelled

Have two location; at Logan Square and at Ravenswood.

Deliver to events fully prepared pies on order.

Allow pick-up orders.

Price of bread. Ranges between $2to $3.

A whole pie costs at an average $15.

People within the middle-income bracket organizing events.

Families in need of home deliveries.

Floriole Café and Bakery Offers an array customized baked products such as caramelized layered croissant dough and fully prepared croissants.

Offers fruit tart and savory café dishes

Located at W Webster Avenue Average price of a croissant at the café is $4. Café has a capacity of 80 to 100 people. Targets consumers looking for high value bakery products during special occasions.
Roeser’s Café and Bakery Specializes in beautiful custom cakes and tortes.

Also offers cookies and special packages during holidays.

Positions as a pioneer in the bakery industry with more than 100 years of service with an emphasis on care and quality.

Located at 3216 W North Avenue at Humboldt Park.

Offers walk-in services from Tuesday to Saturdays from 8AM to 6Pm,

Has a customized budget for customers depending on their budget expectations.

It is classified into:

Under $100

$100 – $200

$200 – $300

$300 – $400

Above $400

The facility targets consumers willing to invest value in items they purchase.

Identifying Competitive Advantage

Customer Want or Need Your business – Sprinkles Cupcake ATM, Chicago Competitor A – Lickety-Split Cupcakes Competitor B – Sweet Mandy’s Competitor C

– Molly’s Cupcakes

Competitor D – Magnolia Bakery
Value for Price Consumers’ convenience associated with the ATMs is enough justification of value for money Handwritten menu boards, aluminum ceiling, marbled tabletop, and pastry glass are enough to give customers a value for their price even before purchasing their cupcakes. Value for price not highly regarded do to a lesser flexible menu Consumers express a high satisfaction for the value that comes along with the price of the cupcakes. Many customers express satisfaction and value for their money due to a wide variety of cupcakes.
Quality Butter cream frosting highly valued by the consumers.

Limited variety of cupcakes.

Provides a blend of cupcakes with ice-cream.

Recommended by the Chicago Tribune as

Provided a limited variety of cupcakes. However, their quality is highly regarded, Consumers pleased with the company’s high creativity and a wide variety of cupcakes such as Blueberry cupcake, Red Velvet, and Peach cupcakes. Customers consider their customized cupcakes to be of high quality
Atmosphere Suitable for fast purchases and pick-ups.

Design targeted for consumers in a rush. Less emphasis on aesthetics.

Highly spacious, well arranged tables and chairs.

Has good lighting.

A suitable environment for having an evening date or a group meeting.

Its design offers a visual appeal and is highly aesthetic.

Shorter serving times facilitated by the larger number of staff in the location. The facility is suitable for walk-in pick-up orders. Consumers consider the environment facility as quick stop to order a cupcake or preorder pickups. A serene quiet environment appropriate for indoor outing and couple dates.
Location Located at 50 E Walton St (btw Rush and Ernst) Chicago Located at 6056 N Broadway St (at W Glenlake Avenue). Original site located at 1208 W Webster Ave (at N Racine Ave), Chicago Main location at 2536 N Clark St (between Wrightwood and Deming), Chicago Located at State St between Randolph St and W Washington St, Chicago.

Well positioned at less busy streets thus suitable for consumers requiring a quiet environment.

Memorability The breathtaking experience and awe of buying cupcakes through an ATM. Have a special package of sprinkles offered free to the customers.

Well designed and an aesthetic environment of the café.

Almost all cupcakes have a fruit flavor. Naming strategically designed to align with the fruit flavors. The company stimulates memorability by offering very unique cupcakes, hard to find in any other facility. Offer very unique and well packaged cupcakes.

Points of Parity

Interestingly, all the brands provide the conventional cupcakes such as red velvet, carrot, and banana chocolate. All the brands target consumers in a rush willing to pass by and order a cupcake. Each brand has its own positioning to enhance memorability among the consumers. All the brands ensure that their consumer obtain value in the money spent to maintain a wide loyalty base. All brands are also using high quality products.

Point of Difference

The major difference between Springs Cupcakes and other brands is that the company has been able to establish cupcakes ATM. Being the pioneer in the world, it has created a lot of publicity for the brand. It has also increased consumer curiosity and technological awe. Many of the consumers initially loyal to other brands are now visiting the ATM to have an experience of how it feels. The ATM is accessible 24/7. These presents the brand with a competitive edge such that it is able to serve customers late into the night and early in the morning.

However, Springs Cupcake has not been able to net the consumers requiring a quiet place to talk, hold a small meeting or relax while enjoying a cupcake. Brands like Lickety-split have been able to do this effectively. It is important for the brand to employ design strategies that improve the aesthetics of the cafes adjacent to the ATM to close the gap present. Another point of difference is a reduced variety of cupcakes sold in comparison with other brands. This could be attributed to the limited space in the ATMs. The company needs to improve ATM robotics to increase the capacity of cupcakes. There should also be voice simulations at the ATM to promote interaction.

References

Chen, D. C., Overby, J., Padgett, B. L., Long, N., Mellott, L. H., Vandermark, L. & Boone, L. (2015). Instructor’s Notes: Sprinkles Cupcakes: A Case Study of Creating a Successful Internationalization Strategy. Journal of the International Academy for Case Studies21(4), 149.

Kolak, M., Bradley, M., Block, D. R., Pool, L., Garg, G., Toman, C. K., & Wolf, M. (2018). Urban foodscape trends: Disparities in healthy food access in Chicago, 2007–2014. Health & place52, 231-239.

Martínez-Monzó, J., García-Segovia, P., & Albors-Garrigos, J. (2013). Trends and innovations in bread, bakery, and pastry. Journal of Culinary Science & Technology11(1), 56-65.

Last Updated on March 13, 2021 by EssayPro