Operational Challenges
For the Independent Coffee Retailer in 2007

by Bruce Milletto

In the early years of retail specialty coffee, few independents developed savvy marketing programs or strategized about how to grab market share. The industry was still new and the biggest challenge retailers faced was how to educate the public about the difference between a mocha and a cappuccino.

Competitive challenges, that were not problematic or did not exist at all a dozen years ago, loom for the specialty coffee retailer in most parts of the U.S today. These challenges are certainly not impossible to overcome, nor should they dissuade budding entrepreneurs from opening a new business or expanding an existing one. However, they must be taken seriously to stay profitable.

The biggest challenge is how to compete against the chains. At one time there was only one actual national chain… Starbucks. Today, there are hundreds of smaller chains that you must consider in your overall and ever-changing business plan.

I have written and lectured many times on exactly how to out-market a large national chain. I often use the following analogy: “You are the skateboard and they are the semi truck and both of you are trying to get through traffic in New York City. Maneuvering a skateboard is much easier.” This is still true, but your skateboard will get you there faster and your movement will be swifter around obstacles only if you plan your course well and do everything to near perfection.

When you are marketing against a smaller regional chain, your battle may be much more difficult. You may not have the advantage of changing course faster than they do and you may not be able to market yourself as understanding the local playing field better than they can.

A final challenge that retailers now face in almost every part of the U.S. is increased competition with other independents. Ten years ago there may have been only a few coffee establishments in Columbus, Ohio, but today there may be dozens upon dozens.

There is no single magic bullet to success. However, no matter how formidable the competition, only hard work, a great location and savvy business practices will lead you to true success.

Two of our clients, who opened their business in an area with impressive competition, contacted us recently. The young couple, whose coffeehouse is less than 2,000 square feet and has been open three months, is averaging about $1,800 a day during the week and over $3,000 on weekends. Their numbers are improving each month, and I speculate that they are not even close to reaching the top of their growth curve. During the next two years, if they continue to do what they have done since conception, they should see huge growth.

At our first meeting with these clients they told us they knew they would have an uphill battle for success, and that growth would require hard work. They knew their product, operational systems, marketing, layout and design, customer service and ambiance had to be better than that of their existing competition. They listened to professionals and actually heeded advice, which is almost unheard of today.

The year 2007 is a time in the life cycle of the U.S. specialty coffee industry where as an independent the only way to see growth and success is to manage your business as though your business life depends on it, because it does. To be successful, you must hire smart, train well, and maintain and monitor every aspect of your business. There is no doubt you must work harder and smarter, because even though the challenges are more formidable, there is still success to be had in the challenging retail specialty coffee market.

Bruce Milletto is the President of Bellissimo Coffee InfoGroup and Founder of the American Barista & Coffee School.