Re-envisioning the retail experience

I came across the the video above on Twitter the other day and I recommend you watch it if you work in retail coffee. A lot of the points that James makes are excellent and there’s one particular bit where he mentions ‘vinyl’ that almost broke my heart. You’ll see when you get there.

Anyway, James is a one man dictatorship, although a lovely one, and doesn’t allow comments on his blog. We attempted a chat on Branch but that quickly turned into a conversation about, well, everything really. I therefore decided, under duress from the dictator, to post some thoughts on here.

I definitely agree with James in his assertion that the way coffee is sold should/can/will change and I see that this is a good thing. I’ve always said that on my day off I’d pay a fiver for a cup of coffee if it was good value and I believe a lot of people reading this would too.

The word value here is crucial because it can’t be just an expensive coffee, it needs to be worth every penny. What you pay for has to include everything from the drink to the service to the setting and everything in between. I’ve paid €12 for a glass of wine and not thought twice about it because it was good value in that particular context. The best value meal I’ve eaten this year was also the most expensive. Last year it was somewhere in the middle of the price range. Price and value are not the same thing.

The question I really began asking myself though was about the viability of a “low-volume high-price” coffee bar where people like me would come to drink coffee in its best case scenario. We’d enjoy the service, have great coffee, avail of the free wifi*, nibble on petit-fours and generally have a €10 luxury half hour.

The implication that James makes in his talk is that the current specialty model involves selling the traditional way, but with higher costs. I see this everyday at 3FE when I wonder is it worth re-pulling shots, spending more on coffee/machines/equipment and doing things in a quality-focused way that take twice as long as they do elsewhere. Is it worth it?

Can we make money selling the traditional way but with better coffee and higher standards. I still think we can, given the right skill set.

Admittedly, our prices are slightly more on the expensive side at 3FE but for a long time they weren’t. Did I make any money? Nope, not at all. I was pretty much broke to be honest but we did get a name out and build a reputation. Its a strange feeling to own a coffee shop that people all around the world are talking about but still have to search the back of the couch for train fare. This is sadly a reality for a lot of startup specialty coffee shops and it definitely was for me.

I also know folks that have investors behind them pumping massive funds into a startup and they too are broke. There is no easy route into this industry. Everyone’s context is different and there is always a sacrifice to be made. Anyone who runs there own business and is reading this will know all about the consequences and sacrifices to be made, both personal and financial, and wonder from time to time if they were worth it.

In saying all this though, is this any different to the rest of the food and drink industry? I’ve met a lot of F&D business owners in the last few years and I’d be surprised if any more than 20% were actually making a wage that they were happy with. The catering industry is an expensive one to start in and even more expensive to keep going in.

If we drop coffee into a larger food and drink category you’ll find that very few of them are actually profitable and it would be unfair to suggest that other F&D businesses are doing better than we are.

To suggest that charging more per cup will make you a more sustainable business is just fooling yourself though as all the variables that are static at a low-price business begin to shift up the curve. Standards begin to move if people are to pay more and the barrier to entry begins to rise with it. You suddenly have a smaller market, less visits per customer and higher unit costs.

Every week in Dublin I hear about a high-end restaurant that’s beginning to creak and see a cheaper restaurant thats flourishing. The same can also be said the other way around though.

My point is that once you’ve decided on your business model you need to be professional, hard working, diligent and (a lot of the time) lucky to ensure that your business is successful. The price point itself is almost redundant in determining if you’ll be successful, its more your ability to apply the model that suits your price point.

Im not sure if anyone has managed to build a sustainable coffee business on the high price per cup model without having one of the following criteria in place, or perhaps even a few;

i) an existing successful coffee bar elsewhere to draw out the new bar’s burn rate
ii) access to cheaper coffee, e.g. as a roaster/wholesaler
iii) an existing skillset and inventory to facilitate such an approach
iv) attached to a ‘traditional’ coffee bar i.e. a brew bar
v) pop-up approach, not designed to stay longer than a few months
vi) A pot of gold

We will continue to charge a little more than most for our coffees and continue to offer value for that price. In the coming months there will also be more expensive options available but the initial feedback in the last few weeks has been hugely positive from those seeking a tasting experience rather than a simple ‘drinking’ one.

I’m excited about offering the ‘next step’ in specialty coffee and I know right now that it will be painful, difficult and result in us losing some customers. In saying that I know we’ll gain more customers and challenge ourselves in what we do, like we’ve always done. Wherever we drop the pricing pin though there is always the constant necessity to be an excellent business in every facet of what you do, whether its accounting, marketing, H&S, HR or quality control. As the industry gears up to charge more and change the way we do things, its important to remember that a higher price is not the only answer to making a business viable. Personally I’ve found the tasty coffee part easy, its the other stuff thats difficult.