This morning, riding the elevator up to the office, a young lady spotted a cup of coffee in my hand and asked, “Was the coffee free today?”. “No, but it should be”, I replied. She agreed.
Joe’s is what I would call a lifestyle coffee shop (others might call it a “destination coffee shop”). Joe’s has 3 downtown locations, a weekend running club, private coffee classes and a podcast (no, I’m not kidding). Joe’s is the kind of place people think of when considering how small businesses need to evolve – savvy branding, intelligent marketing, localized lifestyle appeal and, in-turn, a community following. In June 2007, West Village mainstay, The Grey Dog’s Coffee opened it’s second location just 3 blocks from Joe’s and directly across the street from my office. Grey Dog’s equally impressive branding and frighteningly cultish local following has resulted in fairly fierce competition for the Central Village, lifestyle-coffee-shop crowd. Starbucks wouldn’t stand a chance on University Place.
News Bar is nondescriptly situated halfway between Joe’s and Grey Dog. From the street one could easily mistake it for one of many magazine shops that litter NYC. News Bar is not a destination. And it affords no particular lifestyle to it’s patrons. Supplementing coffee sales is packaged food, computer terminals with internet access and a selection of magazines most have no interest in reading. The coffee is slightly outclassed by it’s local competitors, but slightly cheaper, making it a good choice for those who want their daily cuppa free of any retail cachet. News Bar could compete with Joe’s alone, but they immediately felt the impact of Grey Dog’s opening. Three coffee shops within three blocks was one too many.
So they innovated. Most dismissed the first day of free coffee as a one-off promotion. But it happened again the next week. And again. Two weeks later, with a new partner, we’ve just had two consecutive days of free coffee on University Place. Fuji Film has taken over News Bar to promote a new line of digital cameras – plastering the store with signage in the process. Those who managed to make it past the overly friendly greeters hawking cameras and pushing giveaways were rewarded with any coffee or espresso based drink on the menu for free. News Bar may be on it’s way to transforming itself into a completely ad-supported coffee shop. Imagine, a coffee shop with free coffee.
Obviously, the potential business model News Bar is experimenting with closely resembles that of many online destinations: offer your basic content for free (coffee) and sell supplemental & premium content (food, newspapers, etc…) alongside the basics. I wonder what other sources of inspiration for small businesses can be found online. Maybe bodegas could take a cue from Radiohead and introduce a variable-pricing scheme – chain supermarkets are in no way equipped to negotiate the price of milk with each customer. Or how about an “open-source shop” where customers can directly decide what goods should be kept in stock? Could a store with user-generated staff work? Are there any small-business models that can take advantage of network effects the way social networking sites do? And what about community building? Ideas like this come to mind.
A friend has started me on thinking about how to help small businesses. And while he seems to be focusing on enabling them to compete with the mass marketing and advertising of retail chains, I think I’m going to spend some time thinking about how to evolve the business side of it. Small Business 2.0 I suppose. Stay tuned.
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1) Grey Dog 4Eva!
2) Starbucks on 8th Avenue and University still does quite well. In fact, even though I like Grey Dog (see 1), I still used Starbucks mainly cause I was sure that I could use my credit card to but a dollar cup of coffee when I didnt have any cash. Grey Dog has a 5 dollar minimum.
3) Services like free coffee have actually been quite successful at a lot of places. Go to stores in the burbs and free soda with a meal is not really that uncommon.
4) News Cafe has a potential brand problem in giving away free services like coffee (especially since Starbucks has convinced people that the more expensive coffee is, the better it is). If they give out free coffee they run the risk of people thinking they are cheap and then it becomes harder to charge 8 bucks for a sandwich. The aforementioned suburban chains have a value brand and charge accordingly for it.
5) While pretty, it is hard to write a long comment on this blog with the moving background.
6) I like Matt Webb’s site too.
sure, but are any of those stores offering free coffee actually coffee shops? or are they more along the lines of a deli offering free coffee with every breakfast sandwich? i’m not talking about promotions here. i’m talking about a coffee shop who’s primary source of revenue is ad sales.
i agree with you on the brand problem. especially since the business model draws even more attention to the fact that profitability depends on the margin between ad revenue and production costs. but at the same time, i think most new yorkers are well aware that a cup of starbucks only costs a tenth of what they pay.
oh, and comments on this site are not for the weak stomached.