Paul Wallbank – Brilliant Communications

Cheap coffee and the changing service sector

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Paul Wallbank

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I noticed the queues one morning when calling into the local service station to grab a carton of milk at 5am.

There was a line of tradesmen out the door waiting to buy a $1 self serve coffee. Freshly ground with your choice of espresso, latte or cappuccino.

No messing around, no being patronised by snobby barista – just a cheap, decent quality cup of coffee.

For the last few years these machines have been popping up in convenience stores and service stations, freshly grinding beans to order and delivering a reasonable cup of coffee for a dollar or two.

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Cheap coffee at the local convenience store

None of the machine made cups will beat a coffee made by a good barista, but are half or a third of the price being charged by many cafes whose product often isn’t much better (and sometimes worse) than that made by the machines.

With the rise of the service economy in the 1970s it was assumed employment would move from factories to jobs like baristas and serving in cafes, now we’re seeing automation taking over those jobs as well.

The 1970s assumption that the service industries would become the mainstay of the economy turned out to be true with over two thirds of the workforces in countries like the US, UK and Australian employed in them them by the end of the Twentieth Century.

Now industries are restructuring again and the assumptions that worked well for the last fifty years are being challenged by automation and increased outsourcing.

The idea we could build an economy based upon us all making coffee and waiting tables for each other was always problematic and so it is proving to be.

It’s worth thinking about the opportunities this presents for your business.

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Comments

7 responses to “Cheap coffee and the changing service sector”

  1. TNA

    I’m currently amused by the advert for the Comm Bank (I think. Bet that annoys the marketing dept.) where the example of a cafe owner is used as to illustrate lending for innovation.

    Reply
    1. Paul Wallbank

      Yeah TNA, it’s interesting the push by the Big Four Aussie banks in lending to small business. I guess their advertising agencies figure cafes are sexy.

      The ad that’s irritating me at the moment is the beer commercial that orders us to attend ANZAC Day dawn services. I wonder how many of SAB Miller’s, Channel Seven’s or the advertising agency’s executives will be dragging themselves out of bed at 4am?

      Of course we should always commemorate our great grandparents’ sacrifice that today allows us to drink processed alcoholic swill posing as beer.

      While we’re raising a glass, we probably should put the week’s wage through the pokies. Grandad would be proud of our sacrifices.

      Reply
  2. Sholto Macpherson

    AFAIK the big four banks will only lend against physical assets or property, not against IP – which is a bit of a problem in an internet-based economy… I agree – a cafe probably not the best example of lending innovation.

    Reply
    1. Paul Wallbank

      Interestingly Sholto, the ANZ is claiming they will give ‘unsecured’ loans as part of their current push into small business lending. My guess is that IP won’t count as ‘security’.

      The whole small business lending battle at the moment is fascinating – I can’t help but think that is another attempt by the Big Four banks to grab more of the baby boomers’ assets as mum and dad are leaned on to guarantee loans to Quinten’s and Madeline’s start up businesses.

      Reply
  3. Lindy Asimus (@lindyasimus)

    I’ve been watching the growing number of cafes opening up in our centre of town and wondering how much longer this will continue before it blows up. There is only (surely) so many people willing to shell out the best part of 5 bucks for a coffee – plus parking. That’s a lot of money over a year. More so if you are walking distance and visiting a couple of times a day for a hit. Will this market too become over-saturated? I’m guess it might. And these premises don’t arrive all set up for nothing. That’s some serious money invested there.

    Reply
    1. Paul Wallbank

      Good questions Lindy, an interesting aspect to this is the “lipstick effect” – that coffee is an affordable luxury which people will continue to pay for even if times get hard.

      I think that assumption is questionable at best given the business model of many cafes is that regulars will buy two or three cups a day.

      A three dollars a cup (I’m using low figures I know), two cups a day, five days a week comes to over $1300 a year. I’m not sure many people will spend that sort of money if their finances come under pressure.

      Your point about fit out costs is pertinent as well. I wonder how many of these cafes are vastly over capitalised.

      Reply
  4. Andre

    Wait for self driving tech to take over truck driving and cabs.
    Note the company spending in the U.S. on tech. The companies are returning to pre- GFC profitability, the non Zombie banks are back yet the jobs aren’t being created.

    Reply

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