The coffee shop culture has developed gradually in the UK, to the point where it now provides the backdrop for one of the nation's true growth markets. According to the Project Cafe 2016 UK report (commissioned by Allegra World Coffee Portal), the number of coffee shops surged past the 20,000 park in 2015, as Britons spent a staggering £7.9 billion on their favourite beverage.
This spending represents annual growth of 10% and shows no sign of abating anytime soon. The rising demand for high quality coffee has also heralded a rise in the number of independent shops and burgeoning chains, as several new and exciting start-ups look to compete with market leaders such as Starbucks, Cafe Nero and Costa.
So although these brands remain dominant and control more than half of the market as a whole, there is ample opportunity for newcomers to quickly make their mark and establish their brand.
It is easy to see why such a growth market would appeal to ambitious entrepreneurs, however, the competitive and crowded nature of the sector means achieving success represents a significant challenge.
What also makes it more difficult is the crucial role of your purchasing decisions, from choosing the right coffee machine to making an informed decision on suitable indoor or outdoor furniture. Budgeting is a key part of running a successful coffee shop.
Here are 5 practical tips for you to consider...
#1 - Understand the nature of the Market
Whenever you enter any commercial venture, it is crucial that you understand the true nature of the market and its margins if you are to be successful. In this respect the coffee shop sector can be misleading to newcomers, especially when you see large corporations and market leaders driving a cumulative turnover in the region of £3.3 billion per annum.
Given this and the affordable nature of coffee as a commodity, it is natural to assume that high profit margins are relatively easy to achieve. This is far from the case, however, as driving a high margin on a low-value product means little unless you can sell in volume on a consistent basis. This is where market leaders like Costa lead the way, as they sell through hundreds of UK outlets on a daily basis to achieve their desired margins.
#2 - Start small and look to grow organically over time
On a similar note, it is also crucial that you recognise the competitive nature of the marketplace when creating your business plan. There is no doubt that you will need to think strategically and target a small share of this market to begin with, for example, keeping overheads low as you look to establish a reputation for excellence before growing organically in line with demand.
So while it may be tempting to launch a premium or speciality coffee when you open your shop, the costs involved will impact on your price points and may prevent you from establishing a core customer base. Instead, start small and with a narrow focus that enables you compete for a viable share of the market.
#3 - Create a unique selling point that appeals to your audience
Aside from helping you to initially establish your coffee shop, identifying a viable target audience (beyond generic coffee drinkers, of course) also makes it easier to establish a relevant and unique selling point. This ultimately offers you the best chance of succeeding in the coffee shop market, as attempting to launch as a standard chain or outlet will simply cause your brand to become lost amid a sea of competitors.
One of the best ways to achieve this is through the design of your brand and flagship outlet. After all, the sterile and uniform layout of Starbucks and Costa stores can alienate some customers, many of whom prefer a homely experience when enjoying a cup of coffee. By creating a warm brand and an inviting outlet, you can establish a sharp contrast with these large corporations and showcase your unique value proposition clearly.
Similarly, why not focus on optimising the quality of your coffee while minimising price points when you launch? This will certainly help with driving volume and making sure that your customers get excellent value for money through your brand.
#4 - Choose your location wisely
As a start-up coffee venture, you will probably launch your business with a single store or outlet. This makes the selection of your location crucial, as your choice will ultimately be one of the key factors that determines your success or failure.
So where should you look to establish your brand? Approximately two-thirds of consumers buy coffee when they are on the move, whether they are on the way to work or racing to catch a train. Choosing a central location with heavy foot-fall is therefore crucial, especially if you can find a piece of real estate close to good transfer links and busy commercial areas.
This may prove costly, although it is the type of investment that can deliver long-term gains. If such a location is outside of your means, however, you could consider investing in a pop-up retail space in a busy shopping mall or on the high-street. These can be leased on a rolling contract, helping you to save money as you launch your brand.
#5 - Empower your staff to create a positive customer experience
We have already touched on the importance of creating a unique selling point, and one the best ways to achieve this is to cultivate a positive and rewarding customer experience within your store. This has other benefits too, particularly in terms of marketing your brand and commanding attention among your target audience.
Your staff are central to this effort, so it is important that you recruit with your brand's philosophy and specific personality traits in mind. By hiring customer-facing staff who buy into your brand ethos and are passionate about the coffees that they sell, you can create a positive atmosphere which helps to inform, reassure and satisfy consumers in equal measure.
This translates into an outstanding customer experience, and one which transcends products and the market as a whole.
The Last Word
Hopefully, these steps will help you to create a unique and memorable coffee shop brand that has an excellent chance of success in the market.