Question:
During pandemic lockdown, all these people started their own custom cookie-making business. They are stay-at-home moms who don’t need the income and don’t need to pay staff, so their pricing is way below ours. How do we compete?
– Bakery owner
Answer:
The pandemic lockdown allowed many people who were previously busy with work, kids, hobbies and other activities to explore their culinary ambitions. I split my sourdough starter many times for so many industrious neighbors and watched others provide meal plans, specialty cakes or online cooking lessons. That’s great—it’s the spirit of entrepreneurship and gets more people engaging in food.
As we get back to our routines, though, I think most of these ventures will resolve themselves by folding or becoming “jobbies” that some people use for a little extra cash here and there when they feel like it. I don’t see them as a serious threat to your business and think it’s best to focus on your own operations and let them fizzle out.
If they try to scale, they will face the same challenges you have—commercial equipment, approved facilities, insurance, staff, payroll and so on.
That said, everyone starts somewhere, and a couple of these home-based businesses may grow to become your competition. In that case, focus on your value proposition. What do you offer that can’t be easily replicated by a home cook? What benefit are you really providing your customers?
For example, if you are doing hand-decorated sugar cookies, it is likely that you can’t compete effectively with someone who doesn’t have payroll concerns and has an artistic flair. Fine—let them have it. But I don’t know any home bakers who can nail good Viennoiseries at scale since they don’t have a sheeter and foodservice products.
My advice is to be a kind neighbor and focus on your strengths. Make sure your good products are great and cut those that are not giving you the margins you need, especially if they are the kind of labor-intensive products that anyone could do if they had the time.
More on managing competition here.