A lovely little take-away coffee shop opened in our city a few months ago. I've been watching them closely since day one, spending some time talking to their staff and drinking the coffee too. It’s great.
That said, they've commented that they’re not selling as many coffees as they would like; it’s not just my assumption. Have they worked out why, however? Let’s take a look.
What they've got right.
1- The coffee.
It really is great coffee. They offer a perfect range of cappuccinos, lattes and americanos, all handmade from freshly ground beans of the highest quality.
The team seem to put a lot of effort into researching and sourcing great coffee beans, regularly offering different guest roasts for their customers to try. There are no short-cuts here, and by all accounts it’s a coffee-lovers dream.
2- The people.
The staff are really enthusiastic about coffee, and equally knowledgeable. They’re friendly and welcoming, keen to engage and can talk at great length about anything from bean harvesting to grinding techniques. They’re true coffee devotees, with the added benefits of being warm and welcoming (I'm talking about the staff, but the coffee is too).
Really great people.
3- The branding.
I really like their branding. It’s subtle, with a focus on being organic, fresh and…boutique, all at once. It’s clear that they’re ‘into’ coffee and their branding positions them nicely away from any tiny little family affairs that sells scones baked last week by the owners mother.
The name, colours, design, font and presentation are all very good. Better than any other coffee shop in town, perhaps with the obvious exception of Starbucks, who likely employ small armies to work on branding.
If you’re used to paying high-street prices for a cup of coffee, you’ll be pleasantly surprised to find that Coffee Shop A (I’ve decided to appoint them a name for the purposes of this article) manages to price just under or equal to what you’re used to.
Small batches of fresh coffee for the same price as a large franchise? You got it.
5- Rewards program.
Coffee Shop A runs a nice little rewards program that offers you your 10th drink free. Sure, it’s not the most generous offer in the world, but that’s not the point. It’s a great touch, it shows that they put a value on repeat business (and you as a customer) and they’re keen to offer it to you when you first drop in to buy a drink.
What they've got wrong.
1- The location.
As it’s a coffee shop and not an online retailer or a business offering a digital product, they need space. Now they do have space (for take-out), and what space they have is designed well.
However, it’s their location that’s killing them. They’re at the back of a small industrial estate on the edge of the city. They’re surrounded by mechanics, small (manual labour) businesses, building contractors and car dealerships.
The footfall is minimal. Nobody goes to that industrial estate unless they’re on business and travelling by car. In a city so heavily visited by tourists (with has enormous benefit to the centrally located catering businesses), I find it very unlikely indeed any of them would ever find their way to their location. That assumption seems to be holding true.
But, footfall isn't everything with coffee shops…
2- The market research.
The owners of Coffee Shop A knew that they wouldn't get many visitors or tourists buying their coffee. Perhaps they hoped for a few more than they've had, but they knew it wouldn't be where the most business came from. They were banking, quite literally, on the businesses around them.
But it’s not happening. They’re not coming. Why not?
Well, it’s obvious when you think about it. Coffee Shop A just can’t compete with the free coffee in the canteen rooms of the businesses that surround them.
Their coffee is so much better, but the local businesses (who aren't even trying to compete) are destroying them when it comes to both price and convenience. If I work in one of those businesses and can get a coffee for free just down the corridor (and share a brew with my colleagues), why would I choose to pay for one that is a few minutes walk away?
Only a die-hard coffee enthusiast would do it, and there just aren't enough of them to make business viable. This isn't NYC, the people per sq. ft. ratio is much, much lower.
Where do you go from here?
1- Think about changing your business model.
Here are a few ideas. I’d want to research them properly before embarking upon any of them, but it’s a very valuable thought exercise to assess other opportunities.
Perhaps one can build a business (or a strong subset of a business) by selling coffee beans or ground coffee instead? Build a strong brand as a coffee company rather than a coffee shop, and consider whether you can prosper by shipping coffee to coffee shops and enthusiasts around the country.
What about offering to supply the coffee to the local businesses who offer it free to their staff? You might be more slightly more expensive than the bulk coffee they likely buy, but if the businesses may be open to offering a premium coffee to their staff or even to their own customers.
2- Try some new sales techniques.
What about offering referral discounts? Every time one of your customers brings or sends a friend, they get one coffee closer to their free 10th drink?
Could you place an emphasis on the social aspect of drinking by offering discounts for when 2 or more coffees are bought together?
What else can you sell? What can you offer those around you that isn't available for free in the immediate proximity? Snacks? Toasted cheese sandwiches? Do some research!
3- Move location.
I am hesitant to list this purely because it may be prohibitively expensive for such a young startup. You’ll lose revenue during the switch, you’ll pay for the move and you’ll likely have a vastly increased monthly rental in a space that has higher footfall. None of this works well for a small business. But if all else fails, and you’re committed to seeing this though, you can’t rule it out.
It’s essential that you set some targets for experimentation, set some goals that are time bound and then go for it. Be decisive. If you’re going to change, do it. If you’re going to move, move. Don’t just sit tight and slowly die.
An interesting point to note with regard to coffee shops in general is that they’re not normally utterly dependant on high footfall. Coffee has become much more of an occasion or a destination than an impulse purchase, so traffic certainly isn't everything and offering very high coffee can be a more decisive factor for growth. That being said, when a business is tucked out of sight in a small city, surrounded by potential customers who receive a similar (and clearly satisfactory) product in unlimited amounts, everyday, for free, you’re in trouble.
A second point of interest is that it would be really easy to point a finger and be critical. Don’t. Put your efforts into offering help and support instead. It’s extremely difficult to get everything right in your business all the time, and it’s often really useful to hear outside opinions and perspectives.
Dunwiley offers business advice, coaching and strategy consulting to startups and small businesses. If you want to know how to grow your business, how to be more profitable or need another perspective, get in touch. We're based in Salisbury, Wiltshire but work in London, Hampshire and surrounding counties.
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