Sunday, February 17, 2008

Finding Your Niche

Small business thrives in the niche. Yes, we all aspire to grow our business from the garage to godzilla but mighty mouse is a more realistic short term goal. Strolling through my neighborhood this Sunday morning, the diversity of the local coffee house market struck me as a fitting for study of niche strategies. Starbucks has not penetrated the neighborhood, as yet, so there is no godzilla on the scene to stiffle the small innovators. Here is a quick case study of niche strategies employed by the coffee houses of South Grand (St. Louis City).

St. Louis Bread Company (Panera Bread outside of STL) is the big dog. Their calling card is, of course, the bread. But coffee and bread go together like water and wine. They are the biggest competitor in the neighborhood seeking no particular niche while providing coffee, free wi-fi and good, reasonably priced lunch food. The customer base is diverse but heavy with students and business types looking for a place to caffeine up while connecting to a wireless device. They have African blends of coffee and espresso drinks. There is outdoor seating with sidewalk tables but it is cramped. St. Louis Bread Company is the benchmark, the hurdle all other coffee houses within walking distance must get over to compete. You have to meet what the industry benchmark offers plus give the customer a reason not to go to the Bread Company. To recap, the benchmark offers: (a) African blend coffees and espresso drinks, (b) good, reasonably priced lunch food, (c) outdoor seating, and (d) free wi-fi.

The Niche Competitors.

Mokabe's caters to the gay-lesbian crowd. They feature vegan food with an awesome and spacious patio facing Tower Grove Park. The patio is dog friendly with water bowls provided. The food and patio seating allow Mokabe's to extend their customer base beyond the GBL crowd. They also have free wi-fi and serve as an unofficial headquarters for local anti-war protesters. Mokabe's biggest regular draw is Sunday brunch which is not served by any of the other coffee houses or restaurants in the neighborhood. Downer: according to my wife, the coffee is average.

Hartford Coffee Company is the mommy coffee house. I've never seen another like it. Almost half of the customer dinning space has been converted to a children's play area. The mothers turn their kids loose to play while drinking coffee and socializing. My wife pointed out that a second shift of stay-at-home dads also gather at this coffee house late morning. The food is good, reasonably priced with more diversity than Mokabe's. They also have dog friendly patio which is important as many customers on their way to the park leave their dogs on the patio while inside getting coffee. This coffee house is 1/4 mile from the epicenter of the neighborhood (Grand Avenue) upon which all its competitors are located. Thus, they still pull a fair number of students and work at home business types who might not care to hike it 1/4 mile to the other coffee houses. But it's hard to block out the noise from the kids while working on your laptop at the mommy coffee house (I've tried). And on Sundays they have live bluegrass music that drives me out the door (unlistenable).

Gelateria Del Leone, a combo coffee / gelato house on S. Grand. They are the only seller of gelato in the neighborhood. A coffee house a few store fronts down catering to the grunge crowd closed a year ago. Gelateria Del Leone gives off an adult vibe, hard wood floors, exposed brick, tin ceiling, dark leather furniture. Also, they are located right next door to the most popular restaurant in the neighborhood, Pho Grand. When summer hits, I gotta believe there will be a nice flow of customers migrating from Pho Grand for dessert. According to my wife, their coffee is superior to others in the neighborhood. They also have free wi-fi, espresso drinks, and a limited food menu.

So there you have the big dog and the three niche players. Mokabe's caters to the GBL crowd, vegans, and leverages its awesome patio facing the park. Hartford is the mommy coffee house. Gelateria is the Italian dessert, adult coffee house. The grunge coffee house went under, I believe, because (a) they targeted too small of a demographic and (b) the neighborhood is in the process of gentrifying meaning even fewer grunge types.

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