What can a classy cafe bring to a gritty part of town?

Sat outside in the sun this weekend nursing a cappuccino at the newly-opened Cafe Teria in my part of North London got me thinking about how the opening of a classy cafe/bar/bakery can impact on an area.

Cupcakes: Bringing people to a rough area near you. 

Needless to say, there are parties who have investigated this in an academic way - in the US not surprisingly. At the Bloustein School of Planning and Public Policy at Rutgers University they looked at whether there was a link between cupcake proliferation and the flow of capital investment in cities. Only in America I hear you say.

What this boiled down to was the issue of whether 'cupcake gentrification' exists. Does the appearance of cafes selling fancy stuff like the cupcake, artisanal bakeries, and flash delis take an area upmarket?

While we all know that the residents of Chelsea and Knightsbridge in London are drowning in a sea of double skinny lattes and the latest phenomenon whoopie pies, what would be the effect of dropping a purveyor of such goods in a less affluent area of town.

Behind that stucco-frontage they're all eating cupcakes.

The developers of shopping centres have long recognised the merits of securing 'preferred' anchor tenants to new malls (at preferential rentals) as a way of bringing in other quality retailers, which in turn brings in the punters. But what about planners, house builders and developers introducing quality cafes and delis into certain areas as a way of attracting people to live and spend money there.

We are talking about 'seeding' areas with attractive facilities that will boost the credentials of the location and bring in people who might not have previously given the area a second look.

Something similar has taken place in the US with basketball hero Magic Johnson setting up his Urban Coffee Opportunities partnership that provided 50% of the financing required to bring Starbucks cafes to less affluent communities that were under-served by such services.

This has proved successful and the sports star has won awards for his initiative. So could something similar be repeated in the UK? I don't have an answer, but it is an interesting thought and is something that almost tempted me to order a second coffee while I mulled it over just a little longer.

Guest Slot – Recruitment Insider-Nigel Sapsed

Changing prices throughout the course of the day is something retailers seem rather scared about undertaking. Their idea of dynamic pricing goes no further than brightly coloured stickers announcing price cuts on products reaching the end of their sell-by-dates.

Retailers scared of what's in the box.

But in the leisure and hospitality sector this form of pricing is now commonplace and can make the difference between success and failure. Consider that leisure camp operator Pontins – it went into administration last year while its rival Butlins has continued to enjoy booming trade.

Administrators Zolfo Cooper pondered this divergence in fortunes and found the answer was partly down to the fact Butlins years ago adopted an airline-style pricing system. This ensured many people booked early whereas at Pontins the bulk of its bookings were very last minute, which made for very erratic and uncertain cash flows. This ultimately played a large part in its demise.

Butlins initiated dynamic pricing in 2000 and in 2007 they cemented its role in the business when I placed an executive in the company to head up its pricing division who had previously been in charge of prices at British Airways on its key New York and Chicago routes. Meanwhile, Pontins sat idly by.

Pontins: Bluecoats and red ink.

The changes in income levels from adopting dynamic pricing can be enormous and is why more and more leisure businesses have chosen to adopt the system. And thanks to the airlines, customers are well used to such pricing mechanisms.

They know that if they plan in advance then they’ll get a good rate otherwise they’ll just have to go with the flow and the price they pay is largely in the lap of the gods.

Dynamic pricing has also worked very well with the ferry operators – in fact it has saved some of them from near-disaster. The likes of P&O had real problems when tax free shopping was axed, as it wiped out their entire profits, so they examined their pricing methods.

They chose to use pricing to ensure they filled their ferries (to at least cover their costs) and to then gain their profits from aligning this with a more coherent on-board retailing strategy. They cleverly created separate entrances from the boats’ holds for truck drivers, families, and business travellers, that were each lined with retailers relevant to the separate groupings.

Dynamic pricing kept P&O Ferries profits afloat.

On top of this they gave each group their own restaurant – with grubby cafes for the lorry drivers, easy-going eateries for families, and quieter restaurants and facilities for the business people. Turnover took a turn for the better – up 30% on previous levels – and travellers enjoyed a good deal from the ferry company’s use of dynamic pricing.

The same cannot be said for its use by the hotel industry for the Olympics, which has seen the average rate doubling in London for June 2012. I suppose there will be many millions who will come over and stomach the price but there will also be many (including some regular visitors to the capital) who feel slightly let down by this tactic.

There will no doubt be similar levels of disappointment among some people over the adoption by the grocery retailers of dynamic pricing for delivery charges. The idea of home deliveries is that it is convenient, but if the likes of Ocado are going to charge increased amounts for the most convenient delivery slots then I feel it takes some of the appeal away from the service.

This highlights how the decision to initiate dynamic pricing has to be well thought through for retailers and leisure operators. Just ask Sir Stelios Haji-Ioannou whose use of such a pricing mechanism for home delivered pizzas and cinema tickets was not quite as successful as for his pioneering easyJet business.

Nigel Sapsed is director of executive search specialist Sapsed Stevens

Growth in specialist beer shops

Oddbins has just gone into administration, Thresher Group went the same way last year, and pretty much every other specialist booze seller has had a tough time over recent years.

The sun is shining on Kris Wines, its owner and regular customer.

But there is one exception - the specialist beer shop. This post on Retailinsider.com has been prompted by a visit to Kris Wines in north London, which has been around for years but is enjoying booming trade as a growing number of beer afficionados make the pilgrimage to this low-key store for a fix of unusual beer.

Kris Wines might be dishevelled on the outside but it sparkles on the inside. Thankfully it is far from unique today as there is a mini-explosion in specialist beer shops around the country who are benefiting from a number of trends in the marketplace.

One thing is that the premium bottled beer market is doing tremendously well - growing at 3.4% by volume and 6.9% by value year-on-year, according to the recent Marston's independent Premium Bottled Ale report. Such is its appeal, 135,000 new shoppers have been recruited to the category over the past year.

Not found in your average shop.

Where the specialist beer shops gain is that they are massively differentiated from the boring offers that have been prevalent in the off licences of old. They go for super-premium products that are difficult to find elsewhere.

This is in sharp contrast to the chains who have built their models on flogging mainstream brands at knock-down prices. And this has been proven to be a busted proposition as the supermarkets have made this part of the market their own.

Average beers at below-average prices works well for them in their high volume businesses. Although I do have to admit that the big grocers do now sell a decent range of interesting beers (in their larger stores).

But it is still not a patch on the range sold at Kris Wines, or any of the other shops now ploughing this increasingly lucrative furrow.

The growth in premium beer sales is real.

Along with Kris Wines we can include Utobeer in London's Borough Market, The Bottle Shop in Canterbury, BeerRitz in Leeds, and RealAle.com in Twickenham. There are many others that I've not name-checked and I apologise because they are doing a great job. There is also a big amount of online activity from the likes of BeerMerchants and MyBreweryTap.com.

These outlets are benefiting from the willingness of their customers to pay the justifiably racy prices for hard-to-find beers. We are talking super-premium levels here. One of the drivers of this is that brewers are increasingly producing limited edition runs of bottled beers that are proving very collectable and as such demand is high.

Many of these beers are particularly high in alcohol so they benefit from laying down in the same way as wine. This is a world away from low strength session beers and fizzy lagers that are designed for gulping down without thought.

Click on this link to read an article in the Financial Times' 'How to Spend It' magazine on the trend for collectable beers (penned by yours truly).
http://www.docstoc.com/docs/document-preview.aspx?doc_id=73674680

If this Retailinsider.com post does nothing more than whet your appetite to visit one of these specialist beer stores or peruse the websites of one of the online operators then it will have achieved all that was hoped. Go forth and experiment.