Right-sizing high street outlets

During a recent meeting at the original Grind coffee shop in London’s Old Street, I was discussing with data specialists CACI how the branded coffee players will have to better manage their historical physical spaces in this digital, work-from-home era when, after exactly one hour, a server with an iPad asked if we would like another drink.

I demurred from asking her if this was a new policy but the implications were obvious – make a purchase or take a hike and free up the table – which seemed a rather sensible strategy to me as it is only a modestly-sized venue. Laptop-wielding work-from-home types nursing a coffee for hours on end and working groups hogging tables can potentially kill any business reliant on high volumes of sales.

Taking a more aggressive stance with this sensitive issue are a couple of independents that have laptop users squarely in their sights. The Collective in Caversham has banned using such devices between 11.30am and 1.30pm on weekdays and completely at the weekends, having identified such customers as low-spenders. 

Meanwhile, at Milk and Bean in Newbury, laptop usage has been restricted to only one hour on weekdays and a total ban is enforced at weekends. As well as spending little, the owner also feels the laptop-using brigade are giving off bad vibes. Something of a double whammy. 

While these are rather isolated incidents at independents, there are undoubtedly discussions over similar issues taking place at the large coffee shop brands. They are all navigating very different customer journeys from those that predominated pre-pandemic, with their property portfolios and systems that are often ill-suited and were put in place before the explosion in digital ordering. 

Consider Starbucks, which had been a market-leading digital innovator with its app for ordering ahead. This app is now regarded as the company’s biggest Achilles heel, according to former chief executive Howard Schultz, and is a high priority problem to be solved by incoming boss Brian Niccol. He’s already stated that a key issue is the back-ups in the morning as app orders are collected and the in-store teams struggle to cope. He’s also promised to return Starbucks to its heritage of being community hubs where people linger (no doubt with their laptops fired up).

Managing this balance is very hard. This lingering is okay in many Starbucks because the stores are so large, and with the high levels of digital ordering, there is no problem with the laptop warriors commandeering a table for the day. But is it a profitable model? There is no doubt that there is the potential for the downsizing of many outlets and instead focusing more on getting those digital orders out at a faster pace.

The downsizing scenario will no doubt also be on the agenda at Pret A Manger, as it faces the impact of the overhaul of its subscription proposition. The fall-out of the decision will surely be a decline in footfall. Although I have continued with my subscription – on alternate months, as I don’t like in-grained habitual routines – my visits are certainly less frequent. 

These big coffee brands are no doubt looking on enviously at the likes of Blank Street Coffee, which operate from outlets that are a fraction of the size of the average Pret and Starbucks. Many Blank Street units are under 350 square feet, with just two employees per shift, and are located in high footfall locations. They use speedy automated espresso machines, but even when queues do build up, the youngsters don’t seem to mind if the result is association with a cool US brand with an innovative menu – although it has noticeably avoided the menu sprawl that afflicts Starbucks and contributes to its laboured service times. 

Maybe if the big brands could start with a blank sheet of paper, they would devise a model not dissimilar to Blank Street. They are suffering from something that Blank Street will no doubt face in the future if it continues on its impressive trajectory – of having legacy characteristics that place it at the mercy of disruptive newcomers. 

As we left the Old Street Grind after our hour slot, I concurred with CACI that in the past, the chief competition for the big brands were the single unit, often financially underpowered independents with limited systems and poor technology knowhow. But today, the threat is much more dangerous in the form of a growing number of rapidly expanding, differentiated, well-funded, strongly branded players.

Glynn Davis, editor, Retail Insider

This piece was originally published on Propel Info where Glynn Davis writes a regular Friday opinion piece. Retail Insider would like to thank Propel for allowing the reproduction of this column.