Local Coffee Shops vs Starbucks
Every time I’m assigned to a new city, one of the first things I look for are local coffee shops and I visit them all to compare. Once I’m done with this, I choose one near the office and one near my apartment. Often times, especially in downtowns, if you happen see a local coffee shop, expect that the big coffee gorilla, Starbucks will be near.
There was one time in Manila when a Starbucks was being built across the fence of my favorite coffee shop and I feared that it might endanger its business. So, with this situation I got curious if my local coffee shop’s business model can withstand the Gorilla’s global brand.
Here are some of the things I observed how the 2 models can coexist.
- Most local coffee shops cater to mid-market, service professionals, well-off students and a growing middle class in their community. While Starbucks caters the wealthy class, tourists and fancy customers.
- Location, location, location. Like pricing, location speaks the same language. Starbucks are mostly located in downtowns, classy shopping centers and places frequented by visitors. And local coffee shops strategically located in not so fancy locations but progressive.
- In a local coffee shop, you pay for your cup in the counter and it gets served to your table by someone with a big smile. Starbucks, you pay for your cup and you wait for it until it’s ready to take. If you will look at this model, it doesn’t fit the high-end market they are serving. Perhaps the brand makes up for this.
- Infrastructure wise, local coffee shops and Starbucks seem to build on similar capabilities though Starbucks needs more capital for its presence in expensive locations. Add the cost of their advertising and special events.
In summary, both models can coexist because they have their own market segments. Local coffee shops probably make more income from scale and Starbucks from a higher margin. Personally, I love local coffee shops. It feels more authentic.
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