Retailers Expand Customer Base with In-Store Coffee Shops

Retailers around the globe are increasingly opening coffee shops within their stores to attract customers who may not be interested in making significant purchases but still want to enjoy a cup of coffee. This trend is not entirely new, as seen with Starbucks locations inside Target stores. However, the number of brand-owned and operated coffee shops appears to be on the rise. For instance, Ralph’s Coffee, owned by Ralph Lauren, opened in Manhattan in 2014 and is now surrounded by other brand cafés, such as the Blue Box Café at Tiffany & Co., a Capital One Café, and a Uniqlo Coffee around its Fifth Avenue location.

Post-Covid, there has been a renewed interest in creating or maintaining "third places"—spaces where people can spend time outside of their homes and workplaces. Brands are investing in customer experiences to broaden their customer bases both online and offline, and coffee shops seem to be a effective way to achieve this. Uniqlo, for example, opened its first coffee shop in North America at its Fifth Avenue store to enhance the shopping experience and project a welcoming brand persona. Nicolas Cessot, head of marketing for Uniqlo North America, highlighted that this move is a global opportunity to spread brand awareness to customers worldwide.

Uniqlo's coffee shops in Tokyo and Manila prioritize customer experience and hospitality, reflecting a cultural emphasis on these values. Other retailers, like Maison Kitsuné and Muji, have also expanded their hospitality offerings, with Maison Kitsuné opening its first Café Kitsuné in Okayama, Japan, in 2013, and Muji opening a food market in Manhattan earlier this year. American brands like Kate Spade and Coach have also ventured into the hospitality space in regions like Dubai and Jakarta, Indonesia, as well as in Texas and New Jersey.

Brand coffee shops allow retailers to reach customers with different interests, including those who may not be in the market for new clothes but still want a cup of coffee. This strategy is particularly appealing to higher-end brands like Dior and Ralph Lauren, which aim to reach customers outside their usual demographic. Michelle Baumann, chief strategy officer, commerce at VML, noted that a small purchase like a coffee can increase customer "dwell time," making them more likely to browse and purchase other items. Additionally, these cafés can generate social media exposure, with customers often sharing videos and images of their experiences online.

Capital One, which opened its first Capital One Café in 2014, aims to enhance the customer experience by offering in-person interactions around customer service and money management needs. Jennifer Windbeck, SVP of retail bank channels and operations, explained that the cafés host events like coding classes and financial literacy workshops to build Capital One’s brand image beyond just being a credit-card company. The cafés also run promotions to encourage repeat foot traffic, such as offering free drinks every Monday of the MLB season. While the ultimate goal is to drive customer sign-ups, the cafés and deals are open to everyone, not just Capital One customers, allowing the brand to market to the masses in an organic way.

Opening a coffee shop can be a costly endeavor, considering the labor, materials, and potential for stains from coffee spills. However, the continued expansion of Capital One Cafés suggests that the brand is satisfied with its results. There are also reputational risks, as poor service or long wait times can detract from the overall shopping experience. Some retailers choose to work with existing coffee brands to ensure product quality and service standards. Despite these challenges, the trend of retailers opening coffee shops is expected to continue, as it introduces novelty and surprises customers with additional offerings.