As the stock market hits another low for the year and interest rates threaten to break the 4% “floor” soon on 30 year fixeds, it appears that the only businesses that are booming are (i) cupcake stores and (ii) yogurt places. I live in Bergen Co., NJ and have seen 4 new yogurt shops (e.g. Red Mango, Is-A-Berry, etc) pop up within 3 miles of my home in the past year or so. In addition, 3 new cupcake places have opened as well including 1 just this past week. As a matter of fact, judging by the 6 or 7 new employees crowded into the tiny, yet packed, Red Mango store last night, these establishments may be the only ones contributing to the 125,000 new hires for July in today’s jobs report!
So what does this mean? Is it that all of a sudden we all have an urgent need for ice cold desserts and individual sized baked goods? Or, can it be that everyone feels so cash poor that they are indulging in these relatively inexpensive treats? And, if it is one or the other or both, is this a sustainable rally in desserts or just another bubble about to burst? I am still old enough to remember the last “yogurt” bubble that occured about 10 years ago when the dueling long named yogurt companies of “I Can’t Believe It’s Yogurt” and The Countrys’ Best Yogurt (i.e. TCBY) set out to colonize the country with their frozen concoctions. The resulting vacant yogurt stores found several years later, in the then still flourishing strip malls, became the forerunner of today’s real estate bust. Can it happen again? If so, will it be more severe now that the cupcake stores are involved as well?
I actually have no idea. I also am not really concerned about this but think it is a humorous by-product of our economy. Likely there is not such a need in the long-term for so much yogurt and so many cupcakes. But, for now, their brightly colored stores and enticing product choices, bring a smile to all those who come in contact with them. The anticipation of the tasty treats and the choices available (especially with respect to cupcakes where I was happy as a kid to have Drake’s cakes coming in vanilla, chocolate and strawberry), are a welcome and inexpensive guilty pleasure. In many cases they also break up the monotony and depressing landscape of abandoned storefronts in suburban downtowns.
But, maybe, just maybe, rather than being a bubble, they will actually be the engine that drives people back to the downtown shopping areas. Once drawn there, and seeing the hussle and bussle of the commerce occuring in these small dessert establishments, perhaps, people will want to try their hand at small business ownership again. If they do, then slowly, one store at a time, these commercial areas will once again become viable. Gradually, these small businesses will hire employees. The employees will then have money to shop in the stores themselves and start other businesses of their own. This will generate additional profits for the small business owner, who will purchase more goods and services. It will also result in increased tax revenues so states and municipalities can restore services.
At that point, consumer confidence will return. People will again begin to dream of homeownership and start the reversal of the residential real estate slide. Mortgages will then flow from the rivers of the big banks as the great housing industry begins its next cycle of expansion. Can it happen? Why not? So, let’s all do our part and buy our cupcakes and yogurt! Then, let’s allow our sugar induced dreams of prosperity fuel the creativity and business savy in America that have always been our driving engine of success. Otherwise, the bursting of this bubble may mean a long term continuation of the current economic decline. And, more terrifying, without the cupcakes and yogurt we may once again be forced to return to the days of eating whole cakes and ice cream!