GeekMBA360

A new coffee shop opened for business about a year ago near my house. Folks in my community were very excited about it. We live in a newly planned community that has very few shops nearby. A cafe would be a great place for us to meet. Our community also has a number of work/live units for work-from-home people. They loved the addition of a new coffee shop. Plus, people here in the Pacific Northwest are addicted to coffee. 🙂

Unfortunately, the excitement was gone in six months. The coffee shop was out of business in less than a year.

Why? Because the cafe owner made several strategic mistakes.

First, the cafe was positioned as a "premium, organic coffee place", which used the $20,000 Clover Coffee Maker to make one cup of coffee a time. The price reflected the quality of the coffee — a medium cup of coffee was sold for $3, which was 50% more expensive than Starbucks. My  coffee-loving neighbor put it this way: "I love drinking coffee, and go to cafe everyday. But, for most of us, we cannot really tell the difference between Starbucks and the $3 coffee made by Clover machine."

Second, given the economy we’re in, everyone was watching their wallet carefully. It’s not time to spend $3 on a cup of coffee.

Third, the cafe only had several small tables, the chair was very uncomfortable, and it was very noisy. Most of us would love to go there and chat with our friends and neighbors, but the cafe set-up was simply not conducive for having a conversation.

In Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time, Howard Schultz talked about Starbucks being the 3rd place outside of home and workplace. People need a place to meet. This is crucial for any coffee house’s success. The coffee should taste good. But, most customer probably won’t care about the difference between premium coffee and good coffee. What we need is a place to talk to others, to take a break from work, to have a place to open our laptop and work on a document, etc. Cafes need to provide the set-up and ambiences to serve as a "3rd place". It’s as important as the taste of coffee itself.