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Comment by clairity | Hacker News Reader

most folks here are overthinking/armchairing the problem. coffee shop owners have their economics figured out or they wouldn't stay in business. cafes (like the dozens near me) are perfectly capable of sustaining their business with a blend of folks grabbing coffee to go and others sitting for hours.

you don't need to institute limits, subscriptions, nudges, or any other customer-hostile action. just price well, and provide value beyond your costs. one pro-customer option is providing food (beyond pastries) for the lingerers, which adds some marginal cost but adds significant marginal revenue.

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I think you're armchairing the problem by stating coffee shops exist therefore there is no problem. Many coffee shops do impose user hostile actions like loud music, small uncomfortable seating, etc. The others are big chains that have efficiencies (e.g. lower prices, more efficient workforce, better analytics) that are not available to smaller shops.

In most competitive markets you cannot compete (i.e. not lose money) when you have costs that a competitor does not have the bear. For instance, if 20% of your customers are money losers, a competitor can cut those customers out and make a higher return. Everything gets priced in. So that means that person can charge X% less for coffee, or pay X% more for real estate, or have better coffee or better service etc.

Ignoring the trade off doesn't make it go away

as an avid cafe-goer, i've looked into the economics of cafes and talk regularly with the coffee shop owners around me. competition is almost never a concern for most small/independent cafes. starbucks doesn't matter competitively because their prices aren't appreciably lower and they cater to a different segment than independent cafe owners.

the biggest problem is almost always reaching their target segment--like the people already sitting there with laptops--to drive enough transaction volume to be sustainable, which is squarely a marketing problem. rent and labor costs (operations) are usually the next biggest problems. competition ain't the issue.

"Marketing" usually means getting people to know about your product or service and getting them through the door.

If the owner has people sitting there and wants them to purchase more, that's more increasing average revenue per user which is limited. How much coffee can someone drink? If someone drinks a plain coffee, getting them to upgrade to a higher margin sugary drink is hard. You can push food and snacks, but that's also limited since you're not a restaurant and the person can only eat so many pastries or dry goods. For every one customer sitting down there are likely 10 customers that come in during that time. Why focus on the person sitting down?

Getting more people in the door is probably an easier way to get more revenue. Especially considering the amount of people that can sit around all day versus the amount of people that can walk by and pick up a cup of coffee to go. In that regard, competition is definitely a huge factor. If a coffee shop has a 15 minute wait while another one is 5 minutes, I would likely pick the faster one. You can prefer one brand to another, but service is a huge factor.

yes, getting more people in the door was the point--a marketing problem, not a competitive one. what you don't want to do is give people a reason to eschew your shop with customer-hostility, which compounds rather than alleviates the marketing problem.

If it turns into a cold and customer-hostile transaction, I'll just brew my own cup of coffee at home for 80 cents

Yeah sounds like a MBA coming in and ruining a business by targeting the wrong metrics. Success comes by providing a lot of value, not by pushing as many people through the door as possible through creating an uncomfortable situation so the customer leave quickly.

You’re assuming that loitering people are a negative on the business — which is a mistake that Starbucks made as well, to their detriment.

Starbucks did what you’re suggesting to increase turnover and profit at stores — but the opposite happened: sales dramatically dropped, even though the time to serve a single customer and the average customer stay both dropped.

The issue is that Starbucks doesn’t just sell coffee — they’re a cafe. And cafes are in the business of selling thirdspace, where you create fun memories with friends and family. So when they provided a substantially worse version of that product, it sullied their brand and lowered their overall profit, because people no longer associated coffee at their chain with good times.

Similarly, the owner of a small cafe I used to work from loved the three or four regulars who would come near open and stay all morning — us being visibly chatty in the large storefront windows would draw in more of the nearby joggers than if the store was empty. We were a free living ad that getting coffee there was a fun time and popular with locals.

I think you’re ignoring a lot of ecosystem complexity with your “optimization”.

I completely agree. Just think about your own behavior: do you choose the empty cafe or the one with many people inside?

Unless the all-dayers are actually blocking space that other customers could use, they are likelier to profit the business than harm it.

So small cafe owners won't mind, provided they are smarter than Starbucks was.

> Starbucks did what you’re suggesting to increase turnover and profit at stores — but the opposite happened: sales dramatically dropped, even though the time to serve a single customer and the average customer stay both dropped.

Can you show me where starbucks revenue dropped (besides 2020 pandemic dip)?

2021 $29,061

2020 $23,518

2019 $26,509

2018 $24,720

2017 $22,387

2016 $21,316

2015 $19,163

2014 $16,448

2013 $14,867

2012 $13,277

2011 $11,700

2010 $10,707

Or maybe you mean same store sales! Oh wait, those have been up every quarter except one since Q4 2009.

I never understood why people online make shit up. People spout very easily googleable statements like "their revenue went down" so confidently, without bothering to check. They live in fantasy land where they pretend like the goal of a coffee shop is something akin to "serving the community" or "being a third place" when in actuality the point is to sell something for more than it costs to produce. You may want your coffee shop to be a third place. But it doesn't make it a viable business model.

MBA types get a lot of shit on this forum, but MBA types are good at some things. And those things include running a pretty simple business like a coffee shop. It's pretty simple math, you can set clear targets, estimate demand and balance trade offs like what to have on the menu and how much to charge. Sure there's things like investments and long term planning, but they do that as well, just without the romanitization.

https://twitter.com/jonathanmaze/status/1255246119128444930

https://www.macrotrends.net/stocks/charts/SBUX/starbucks/rev...

Just an unaffiliated 3rd party observer here, but is it possible they meant revenue went down relative to corporate projections or didn't increase in line with other factors like inflation?

Just a thought.

Or in selected stores that were piloting changes in a discussion about customer sentiment with Starbucks finance staff I was advising.

I never said they did it everywhere and crashed the company — which is what would be required for top level numbers like those to change.

Yawn — aggregate global numbers don’t represent every trial Starbucks has done at their stores, and this is based on my discussions with Starbucks finance staff about this phenomena.

But sure, I just made it up because my story (in simplified form) didn’t match the numbers you quickly found about global aggregates.

> They live in fantasy land where they pretend like the goal of a coffee shop is something akin to "serving the community" or "being a third place" when in actuality the point is to sell something for more than it costs to produce.

I think it’s interesting that because you couldn’t verify my personal anecdote on public data, you made extremely negative assumptions about me:

- I’m a liar.

- I don’t know about business from spending a decade in marketing, econ, and finance.

You also seem to not even understand the term “thirdspace” or realize that’s a product cafes, bars, and restaurants sell and from where they gain part of their value by being fun and social. Whoa!

> MBA types get a lot of shit on this forum, but MBA types are good at some things. And those things include running a pretty simple business like a coffee shop. It's pretty simple math, you can set clear targets, estimate demand and balance trade offs like what to have on the menu and how much to charge.

Except that this is untrue and a reflection of your own lack of information — though I agree MBAs get an unfair treatment around here.

However, you’re dead wrong about running a coffee shop being simple maximization or “simple math” — but I hope you keep it up. Small minds like yours causing problems keeps me employed to fix them.

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