google-site-verification=b7aBkrAXjuwhs4pjVzYwhvnOTZG52sbV5lOmky-XhdA
  • Tomas Lee

An Entrepreneur Dilemma In The Taipei Coffee Retail Business

Updated: Jul 16


Kwon Saem Coffee, merely opened for less than 3 weeks today, founded by a young, passionate entrepreneur with an 11 weeks old newborn in pursuing his 5 years dream to open up a cozy, artisan coffee shop with his vintage collection. It's located in the Zhongshan Underpass district, but inside a dark, small alley buried around with dozens of used mechanical auto part stores. In its Instagram account, the sole founder has recorded his progression of how his story begins from construction to painting its store image on the iron gate. The store itself is no more than 7Sqft inside with just four high chairs for dine-in customers to enjoy their espresso. Once fully occupied, not much breathing room left inside. And, a window leaves opened during business hours is designed for serving takeout (Togo) orders, as well, becoming the signature image of this coffee shop for the social fanatics.

Learned their name thru Instagram. Whilst paying them a visit on Friday afternoon, rain was pouring outside and there were only his wife and personal friend having a conversation inside. To create the authenticity, their menu was printed right on a torn IKEA Kallax menu with only 3 items: Americano, Coffee Latte, and Single Origin Americano. Their espresso price is charged very generously from NT$50-75, or I should say lower than average market price. Of course, for well testing their product, I ordered my usual, the Caffe latte. The founder himself was then taking a short while preparing my espresso. Meanwhile, thru the English conversation carried by his wife and friend, and the Korean spoke from his wife to the newborn, I determined his family must have a diverted background. Gradually, my coffee was served in a Togo cup labeled with their logo sticker. The latte art wasn't fascinated at all or considered to be a failure. Furthermore, it's not frothy and lack of aroma flavor. After a few sips, I began engaging a conversation to better understand the business and sharing my perspectives with the young founder.

First thing I sought was whether the coffee beans were self-roasted and you all can well guess the answer is a "NO". Indeed, he sources them from a personal friend who's a roaster. The beans he used was a dark roast good for espresso, but lack of fruity, winey or chocolate flavor distinguishing his brand experience from the 4-5 other coffee shops located right within 100ft. Second of all was to find out his career background and the motive why opened this store, in which I found out he worked as a "buyer" dreamed to build his artisan coffee shop and had no single experience in the coffee industry. On the other hand, he brought out his business initiative is to gain business from the offices revoking the district. The La Marzocco espresso machine and grinders have bought in used, the modern contemporary interior design ran the most, and the rent was modest because of the "cold" location. Therefore, the upfront capital expenditure wasn't cheap to him personally. Too, his dream has bootstrapped thru financing. With a newborn and a family to raise, I could instantly associate how much pressure he has on his shoulders and felt sympathetic. After learning all that, I then began opening up and raising out the below observations I'd.

Problems:

1. Isolated Business Location

The founder has chosen a location in an odd spot even within the new popular hipster district to save rent, but also it's a 2-edged sword caused him a higher cost to acquire and retain traffic. Youngsters would rarely travel thru the murky alley that has only used auto part shops, he probably didn't think of. Yet, business clients wouldn't walk over for the same reason. Therefore, he now has to take an active approach reaching out to his targeted B2B customers or soliciting the nearby residents/neighbors. But for a sole business without other partners, it's just not possible for him to manage the store and develop business outside altogether. My recommendation is to start from small by first increasing the conversion rate from the neighborhood and walk-by traffic.


2. Product Quality, Assortment, and Pricing

To be succeeded, his product itself must be "niche" distinctively for customers to come back. So, he has to work on the flavor and presentation of his expresso. The original idea of him having a 3-items only menu is to maintain the operation efficiency, product quality, and lower cost of production but also restrained his chance to adopt a wider customer demographic in the early stage. Plus, the low ASP forced him to focus on selling quantity for achieving his revenue goal, a very effortful task for his location and the single-person operation. My pitch is to optimize his product design for charging a higher ASP.


3. Lack of Effective Marketing Strategy

Besides posting the Instagram and Facebook, and had one published magazine interview, I didn't hear a more constructive marketing plan from him. Perhaps, he has one but doesn't feel like sharing, or there wasn't one at all. For celebrating the grand opening, a box of branded matches will be given away to customers. In regardless, as a self-funded business, I would assume no marketing budget reserved for advertising or other branding activities. Without a sophisticated plan to expand brand awareness, the chance of attracting his ideal customer group, hip youngsters, is limited. My suggestion is to utilize his long hours of staying in store to optimize the power of internet tools, like Google Map and hashtags in Social Media, to funnel customers in direction. Furthermore, create social activities in gathering local artists to his store for building more attention from his targeted customers.


4. B2C vs B2B

In our conversation, he underwent his original plan is to target white collars and business orders. Except the business orders tend to require delivery service, and white collars will not walk in the farther distance whilst other roasters have conveniently served their need, especially their lunchtime is relatively short. The reality is just not feasible for the current model running by only one person. On the other hand, consumer market allows him to perform other productive tasks inside the store during breaks. Therefore, performing market analysis and making an agile decision is essential to his B2C and B2B strategy. My advice to him is to leverage the "Order Now" function on Facebook Page for taking the volume Togo orders and provide loyalty discount to drive more white collars business. To tackle the consumer market, he shall design a more comprehensive experience (as an emotional coherence to visiting the store). ​

5. Scarce Resource Allocation

Effectively allocating financial and human resources for higher returns are critical to his success. To me, product always comes first, and branding comes second. The store may now have quality equipment to brew a good cup of espresso, but that's only half of the successful equation. The succeed couldn't accomplish without sophisticating skill. With the 12 hours long battling every day, the founder must know how to well allocate his time not only for improving his latte art pouring skill (R&D), operation management, decision-making process, and any activity generates revenue but resting thoroughly. In my financial point of view, his rest of capital shall spend on where to have ROI like loyalty program for white collars and upselling to consumers, and limit expenses in wasteful branding or store renovation. Every dollar spent shall have 2X+ return as the baseline.​

6. Cash Flow Management

Today, profitable companies can still fail if operating activities do not generate enough cash to stay liquid. It's not about charging a higher price to increase gross profit percent but driving higher Net Income. In a consequent, it's critical to divert the revenue streams from one source to multiple. ​For the Kwon Saem, selling pastries (e.g. donuts and cookies) and desserts to increase average spending per customer is a good beginning. Another opportunity is to offer a volume discount and collaborate with third-party delivery service to serve the nearby offices and charge a small fee delivering their volume orders.

At last, I sincerely wish him luck because operating the store 12 hours everyday wl very soon exhaust him and his family. My last recommendation for him is to priorize searching a co-founder working together toward his end goal; otherwise, the possibility of seeing his business again in my next Taiwan visit is dim.​

Kwon Saem Coffee | Shuanglin, Taipei

Store Hours: M-Su 8:30-20:30

Address: 台北市承德路二段53巷36號

Instagram: https://www.instagram.com/kwonsaemcoffee/

Products Score: 60 Service Score: 80 Store Score: 75

Final {verdict}: ⭐️⭐️⭐️ 3/5

Ref:

1. https://lifemag.tw/articles/207/KWON-SAEM-Coffee-201810opening

. . .

Thanks for reading! :) Please comment and press ⭐️ below if you liked this article. Your responses would help me to improve the quality of content and other readers to better explore.

#CoffeeTour #retail #Marketing #Entreprenuership #SocialNetwork

©2020 Tomas Lee All Rights Reserved.