Coffeehouse Culture: Questions from the Supply Side

by Sandy Ikeda

One of my students is writing a paper on the “coffeehouse business model,” looking in particular at how coffeehouses can afford to let their customers sit for hours “nursing a cup of coffee.”

One possibility is that this is an urban legend. For example, while I do sometimes spend several hours at my local coffeehouse, which I even refer to as “the office,” I make sure to put a dollar in the tip cup initially, and then get up every hour or so to buy something else and leave another tip – like renting my seat.  I suspect others do something like this as well.

Another possibility is that a crowded store is a form of advertising.  Having zero-price seating will fill the store without clogging the line at the counter, creating an ambiance that will attract more people.  As staying and sitting down catches on, as it has in New York for some time, such advertising becomes free to the store.

Also, those who buy coffee-to-go may subsidize the relatively few (again in the US) who sit, so that “ paper pays for china.”  But I’ve noticed in some places that coffee-to-stay is actually cheaper by the ounce than coffee-to-go because you get more in a paper cup than in a china cup.  If there’s a cross-subsidy shouldn’t it be the other way around or at least the same price per ounce?  Stores may give less to those who stay because of refills but I haven’t seen this happen much – in restaurants yes, coffeehouses, no.  And perhaps there’s no cross-subsidy at all, but only a reflection that the price-elasticity of demand for those who want a place to sit is relatively low, while “goers” have more options.

As noted in my earlier “Coffeehouse puzzle” post, some stores charge for internet connections, computers gradually displacing books as the work-tool of choice.  But not all do.  And some coffeehouses ban computers during certain times, but not books, even though some people (like me) typically sit and read for a very long time.  Roger Koppl comments on the earlier post that computer users may linger longer – something worth looking into.

Anything else?

Lots of questions for my student to investigate, and many hours to be spent drinking and observing in coffeehouses.  Naturally, I can’t expect her to do all the field work herself.

3 thoughts on “Coffeehouse Culture: Questions from the Supply Side

  1. I do think it’s an urban legend that people buy one coffee and then hang out for hours — why would you sit in a cafe if you didn’t want any of its wares? I buy several coffees in addition to pastries or cookies over the course of hours in a cafe. In the case of a less bustling cafe, my long computer use might actually be a boon since I will be sticking around and buying items all day.

  2. Seattle has all the models mentioned here, and more – for instance, Victrola (at their 15th Ave location) offers WiFi during the week but turns it off on the weekend.

    And no, the “squatter” is not an urban legend – I’ve seen people sit for four hours (at least) with only one purchase.

  3. Not only is it possible that computer users linger longer, they might buy less, per hour, as well. With a computer I can be “consumed” for hours at stretch switching back and forth between different tasks. A book is more monotonous, thus my mind wanders more often and I break the monotony with a cupcake or another cup of coffee.

    Also, all coffee houses are not the same. Relatively small/crowded places should aim for a rotating crowd while large/uncrowded places should try to keep their customers at site for as long as possible.

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