There are dozens of non-WeWork coworking spaces across Toronto.
I have absolutely no doubt that I've missed some good ones, but that's how WeWork made me interested in something that I'd put off for so long -- really nice looking interiors in great parts of town/great buildings. They are in no way a tech company, however their aesthetic and values do more closely mirror tech companies than a lot of their competitors that are low cost satellite office providers for low-tier organizations.
This is all nice for customers, but makes for a shitty investment.
WeWork doesn’t have any real competitive advantage when you want to turn it into a healthy, profitable company. Then it will just be any other coworking space; perhaps a more fancy one, but also more expensive.
Starbucks has no real competitive advantage over Local Coffee Co. other than great location, decor and brand appeal too. Thats what OP argues were the deciding factors for them. To attribute nice decor as being nothing more than a sunk cost is erroneous at best.
Clearly Wework has at least some economies of scale, but as for purchasing power not so much. The mass importation, distribution, and sale of a perishable agricultural product is a whole different kind of thing.
WeWork has 10-15% gross margins.
"Gross margin is a company's net sales revenue minus its cost of goods sold (COGS). The gross margin represents the amount of sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells."
WeWork is an international brand. Can you name another coworking space in nearby [state/country]? On the other hand there’s prob a WeWork there with a certain consistency wrt quality that you’d expect.
But the lack of examples doesn’t support the argument the way you think it does.
That means it’s very much an open question if this model could ever be successful. Unlike chain food/beverage which is a highly proven business model.
Good for them, but what’s that worth exactly? Having brand recognition is not at all the same thing as a barrier to entry of a market, or a network effect.
The market for shared or managed office has very low barriers to entry and modest network effects. Thus making the concept of a monopoly in this market more than implausible.
If Starbucks spends less money buying coffee, that means they can afford to spend more money on nice decorations (and better real estate, more ads/PR to increase brand presence, etc.) than Local Coffee Co. The real estate/furniture is presumably a relatively small portion of the operating costs of a coffee shop, so e.g. buying 10% cheaper coffee beans could mean getting a location that's two times as attractive to customers.
WeWork might not be able to do that as easily because for them, the real estate and furniture is their only product.
WeWork won't be able to maintain their venture-capital-fueled level of spending forever. Starbucks' economies of scale aren't a one-time "build the brand" thing, they're a constant source of capital that allows them to continually build and maintain storefronts better than Local Coffee Co can.
I can totally see a world where WeWork, forced by the public markets to attempt to reach profitability, stops putting as much money into their buildings and furniture as they currently are. Then, the next real estate firm disguised as a tech startup can raise private money at a forty-eight million dollar valuation, build even nicer offices, and eat their lunch.
> They have the first mover advantage.
I am not convinced the first-mover advantage is very significant in the short-term office rental industry! WeWork got a lot of customers by selling nice offices at below cost, even though other players in the space had been around longer. Who's to say another company couldn't do the same thing?
Personally for me ability to order Starbucks coffee online and have it ready when I get to the store is a game changer + consistent user experience. Local coffee shops are always hit/miss.
We have private offices, better views, zero annoyance from fellow lessees (nobody leaning over to sell us insurance while we have headphones on, or harassing us about their recruiting services), pay half the rent (even less, now that we signed a long-term lease, previously we were month-to-month).
As far as I can tell, the WeWork across the street has a nicer interior and better coffee. That’s it. That’s all.
And it’s way more expensive and has a way more distracting culture.
I visted the WeWork office on Bloor last year, and it was more like a party than I would like. Seems like a great place to meet a future spouse. Not necessarily a great place for quiet, deep work without noise.
They have a lot of social events. Seems to be their big selling feature. So if you are looking to prospect for customers like a real estate agent or something, maybe it's worth it.
(I understand that most WeWork locations should look about the same, so…)
I still don't get how their "private" offices have glass panes for walls. That's horribly unconducive for work.
We ended up at iQ offices, much quieter than WeWork. Workplace One's new location also seemed pretty compelling, just not in as good a location for those of us commuting on the go train. If internet speeds are important, make sure to ask about that, because most of the offices we talked to had pretty shit speeds.