Friday, July 16, 2010

Existential retail and the meaning of plain old coffee custard

South of the border... I mean river...  there is a tempest in a coffee mug brewing over this blog post by the proprietors of Aldo Coffee in home rule municipality generally known as Mt. Lebanon.  It has sparked the interest of many including Lebo denizen Madison. Their exposition covers the gamut of issues facing retail operations large and small along with a few instances of Yinzer exceptionalism.  Even a bit of labor economics wrapped up in there when they point out that "It's ridiculously difficult to attract good baristas in the 'burbs."  Until reading that I had believed that in the current state of academic economics, which has so many published journals that there are journals about journals, that every conceivable topic has been written on by someone.   Yet I doubt anyone has taken on the spatial econometrics of the labor supply of baristas.  Will add that to my todo list.

In a follow up post they emphasize that the questions they raised may have been blown out of proportion, or at least overinterpreted. They do point out a 'problem' their business model has:
Yet every day, along with taking orders for specific coffees or taste profiles from our regulars, we inevitably get the guy (or gal) who wants, "Just plain old coffee."
Reminds me of a question about flavored custard.... and that I owe Pittsblog a post or two.

Anyway... I suspect Aldo will continue in some form.  Mt. Lebanon will as well.  I have to admit that one of things I don't quite get in the world is the economics of the retail biz.  Those posts reinforce my own notion that there are emotional aspects to the equation that are hard to quantify... by that I mean for most retail entrepreneurs it is about more than the bottom line.  Not a bad thing at all, but it may explain why getting a retail business off the ground is statistically fraught with peril.  That is a true statement universally, but an observation of late reinforces it ..  Anyone else think the number of retail storefronts empty or underutilized at the South Side Works is surprising?


Anonymous Anonymous said...

I know other business owners in Mt. Lebo that have the same problem. The foot traffic on Washington Rd is terrible. The town leaders and residents like to say how wonderful the business district is, blah blah blah. The problem is at the end of the day, they choose not to shop there. They buy their products on the Internet or their coffee at Starbucks. It just makes no sense; the same people who say "please don't close/move" are the ones who drive or walk past daily and never stop inside and buy something.

Friday, July 16, 2010 8:59:00 AM  
Anonymous BrianTH said...

I think the fundamental reason small retail businesses are so risky is that there tends to be a lot of competition, which drives down prices to marginal cost, and lots of businesses end up not being able to recover their initial investments. You can actually see that as the story of Aldo as they report it.

Which just raises the issue--why so much competition if the businesses are so risky? To put the point another way, in risk-adjusted terms a small retail business tends to be a terrible investment, including lots of diversifiable risk for which you aren't getting any compensation in the form of higher expected returns. So why do people do it? Why isn't the equilibrium level of investment down where the competitive risks would be much lower, and the risk-adjusted returns more reasonable?

I agree the answer has to be non-financial. Maybe it is the dream of having no boss. Maybe it is the creative/constructive aspect. Maybe people are delusional about the odds as applied to them. Maybe for some the competitive aspects actually have inherent worth. I don't know.

But what I do know is that those financially-inexplicable investments in small retail businesses end up greatly benefiting consumers, because we get to have all this great stuff available at near marginal cost. So dream on, entrepreneurs.

Friday, July 16, 2010 9:29:00 AM  
Blogger Oreopithecus bambolii said...

I tried to go to Aldo once. I drove out from the City (I live on the North Side), and once I found the place (not easy on its own), I couldn't find anywhere to park.

I was unemployed. I was looking for a place where I could sit with my laptop, drink coffee, and look for jobs all day.
There were only short-term meters on 19 in front of the shop, and the neighborhood streets behind the shop, while unmetered, had only short-term parking for non-residents. Since I wanted to stay awhile and didn't feel like feeding a meter all afternoon or moving the car every couple hours, I circled the neighborhood once, then gave up and found Cannon Coffee in Brookline.

Which was probably for the best anyway, since I was probably going to ask for the house blend, black, and I wouldn't want to offend someone...

Friday, July 16, 2010 10:27:00 AM  

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