Innovative coffee shops are challenging big coffee chains with new retail model

Businesses in today’s food and beverage market have grasped that a surefire means to survive or to stand out from the crowd is to merge the physical and the digital. The same guideline is now being applied to the coffee industry. Smart players are taking maximum advantage of this rule to take on giant coffee chains and grab the lion’s share of the market by proposing online and offline coffee shops. The winners are, undeniably, those businesses that are wise to adopt customer-centric strategies to offer a positive customer experience not only before but after the sale as well to drive customer loyalty and repeat business. The focus, today, is no longer strictly on the coffee as a product in itself, but on the service and experience associated with it. For coffee lovers, this trend can only result in a higher level of customer satisfaction and convenience in buying their favourite cup of coffee.

Delivering coffee rapidly by courier

Various studies in the coffee industry have pointed out that a growing segment of coffee drinkers prefer takeaway options. Some coffee start-ups have decided to go beyond this demand and push customer convenience to the maximum by delivering coffee by courier. The goal is to offer freshly brewed coffee to customers at any time and anywhere, whether they are at work or on a university campus or anywhere else. These coffee start-ups are conscious that mobile dominates, and that innovative apps are key to their success. By proposing an extremely convenient and top-notch service to customers, they are bridging the gap between offline and online options.

One example of such a start-up is Luckin in China, expanding rapidly and challenging the giant Starbucks. The new company is already serving over 1.3 million coffee drinkers. Even if delivering coffee may seem a wise strategy to tap into a larger segment of customers, it does come with its load of challenges. The main reason is that the aroma and flavour characteristics of coffee change quickly as the temperature decreases. Even if each customer has his own pace of enjoying his cup of coffee, everyone has a certain level of sensory expectations associated with their ideal cup of coffee.

As a result, the main obstacles to propose the same gustatory experience a customer would have while sitting down at a shop are time and temperature. Hence, innovative coffee shops proposing delivery options are being cautious to outsource their delivery services by partnering with brands already popular for their rapidity and convenience rather than taking the risk of delivering the coffee themselves. At the same time, in a bid to avoid displeasing customers in case of delays and thus, risking losing them, these coffee shops have been astute to devise appeasing measures. For instance, Luckin offers a free drink in case the client’s order is not delivered within half an hour.

Coffee shops have to offer seamless experiences to stay competitive

These innovative coffee shops are cognizant that the goal is not to become a coffee delivery brand in order to succeed. Such a service is regarded as a means to achieve full coverage of targeted areas and not an end in itself. The new retail model they are relying upon is astutely combing online with offline so that customers can choose whether they want to sit in, whether they want to make their purchase via an app and pick it later at the coffee shop, or whether they want to order online and have their coffee delivered where they are.

The objective, as a matter of fact, is to offer an integrated set of options that offers coffee consumers a seamless experience and which, at the same time, allows coffee shops to reap the maximum benefits across both physical and digital operations. Established coffee shops and coffee chains that have thrived on traditional retail models need to fundamentally rethink their processes and revamp integrated retail processes with new technologies to survive.

This major transformation undeniably involves having a deep understanding of the coffee shop’s value proposition to customers. Simultaneously, a careful calculation should be made given the investment required in terms of time and capital to digitalize and expand services. Nonetheless, such an investment should be taken on a long-term mindset as resisting changes in the coffee market landscape can only lead to failures.

Coffee shops need to adopt a customer-centric approach

Digital ordering and delivery are becoming increasingly popular, with two-thirds of fast casual customers stating to prefer online ordering. This process is not new in the food industry, the most popular ordering and delivery services being requested for pizzas and Chinese cuisine for years even though it was mostly done by phone. In the food industry, this traditional ordering category occupies 90% of the market share.

The rise of digital technology has led to an expansion of such services as consumers are fully accustomed to making purchases online through mobile apps. The high level of convenience delivered makes them expect the same experience when it comes to ordering coffee- the most consumed beverage around the world. In the UK, recent figures show that 95 million cups of coffee are consumed every day. Coffee drinkers are increasingly drawn to innovative online coffee shops platforms, demanding personalization of ordering experience. Research has demonstrated that customers never or rarely leave apps that store their relevant personal data as they find it cumbersome to have to input their details time and again. 60% of customers equally access speed of delivery as a strong variable in customer satisfaction.

The heightened consumer expectations mean that coffee shops must leverage digital technology and omnichannel options to respond to the demands and convert challenges into opportunities. The competition in the coffee industry is no longer limited to local physical coffee shops during specific hours. It is not even limited to having the right product mix. Coffee drinkers want to have their caffeinated drinks at any moment and anywhere and businesses offering a genuine online and offline marketplace are the ones bound to succeed.

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