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Coffee’s Third Place in New Retail

Retail consumers have witnessed an extreme makeover during the past decade; and no, this has nothing to do with your Botox® party last Friday night. Internet-driven companies like Amazon.com and mega store warehouse outlets like Wal-Mart and Costco have changed how we as Americans buy everything from automobiles to zoot suits. Brick and mortar specialty retailers, looking to add value to the experience of shopping in-person, have taken cues from Disney and made their own “most pleased place on Earth” exclusively for you to shop. Not surprisingly, this approach has drawn largely on the appeal of coffeehouses as an effective third place in which we may comfortably congregate and be willingly predisposed to lighten our wallets.

In his book The Fantastic Excellent Place urban sociologist Ray Oldenburg demonstrates why gathering places are essential to a community. He argues that bars, coffee shops, general stores, and other “third places” (in contrast to the first and second places of home and work), are central to local democracy and community vitality. This principle may be seen in action as a part of Starbucks successful marketing strategy,which is based largely on positioning its stores in communities world-wide, often outfitting them with comfortable furniture and wireless Internet access to entice customers to stay longer and come back more often. It is sadly ironic that Oldenburg attributes the societal need for such casual social interaction on the globalization of enterprises that displace local businesses and the adverse affects of mobile technology that makes us each less likely to know our own neighbors. Brilliantly, Starbucks is manufacturing the societal conditions that make its own business model in demand.

The coffee bar is an brilliant choice for retailers to make their own third place since it is relatively inexpensive to implement and operate, less perilous and more politically right than alcohol bars and can by itself be a profitable addition to practically any business model. Just look at a few of this nation’s leading retailers that have benefited from this approach:

Borders Group

Ann Arbor, Michigan based Borders Group opened its first Borders Café in 1990, and now dedicates 1,400 square feet of retail space to its in-store coffee shop in nearly all of its domestic locations.

“The aroma of coffee in the bookstore and the atmosphere a cafe makes invite people to spend time with a book,” says company spokesperson Holley Stein.

Having signed a licensing agreement with Starbucks’ Seattle’s Best Coffee subsidiary to upgrade its independently operated cafes in 2004, Borders Group management noted “remodeled stores perform 2.6% better on average than other stores in the chain,” citing “The cafe and gifts and stationery categories were the strongest performers in remodeled stores.”

Whole Foods

“Whole Foods thinks shopping should be fun,” says John Mackey, company CEO and founder. Since opening the first in 1980, Whole Foods has taken the approach of making a unique shopping experience with a focus on upscale organic foods. Now with 183 location and dozens more under development across the USA, coffee is a substantial part of Whole Food’s business model, both retail whole bean sales and in-store bar beverages.

Bookstores and grocery stores were early adopters of the third place, but are by no means the only places that specialty coffee can succeed. Visit shopping centers, strip malls and Main Street shopping districts around America and you will find florists, hairdressers, upscale automobile dealerships, financial institutions and even pet grooming services serving coffee to build their native businesses. Even petroleum retailers (known as gas stations outside of the industry) tout espresso, cappuccinos, café lattes and other specialty beverages, where only a few years ago glass carafes and stale drip coffee had prevailed.

Smart retailers are taking the approach of making specialty coffee a part of the new “interactive theater” approach to shopping. What could be better than fulfilling our need for community with a excellent cup of coffee?

Andrew Hetzel is the president and founder of Cafemakers, a specialty coffee business consultancy based in Hawaii. Cafemakers shows restaurants, hospitality businesses and coffee shops in North America and worldwide how to improve customer satisfaction and profitability by serving better quality coffee. Information is available online at cafemakers.com cafemakers.com or by calling (808) 443-0290.

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