Jul 25th 2010 Issue
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When to break the rules

Charles Cain - Jul 25th 2010

Adagio's new store

Adagio's new store

Old Orchard floor plan

In business you have to know who you are, what makes you different, and who your customers are. It’s described a lot of different ways, but this is the basis behind your business model. This is your core. And you never deviate from your core, right? Wrong.

Adagio’s plan for our brick-and-mortar retail expansion is to open retail-only tea shops where a customer can enjoy a cup of tea, but we won’t be distracted by food or customer seating. I’ve often explained it this way. Assume we add four tables with four seats each to a cute little tea shop. You rarely get four people sitting at a table for four, so let’s assume that we get an average of 8 people per hour to sit down and enjoy a $3 cup of tea. That’s $24 in sales per hour – roughly equivalent to a single retail sale. To get that $24, I need an extra 150 square feet for the tables and male AND female, handicap-accessible bathrooms (two bathrooms required for 10 seats or more). In total, you’re realistically talking about an extra 300 square feet for one extra retail sale per hour.

More importantly still, putting tables and chairs in your tea shop tells the customer that yours is a café, and people don’t generally do Christmas shopping in cafés. People don’t generally step into a café unless they intend to purchase something to eat or drink. They don’t browse the same way they would in a traditional retail store. Adding a few tables and chairs can quickly relegate your retail products to impulse buy items.

From everything I’ve been able to learn, if you take a $500,000 Tea Retail shop and attempt to add a foodservice element, you’ll loose 80 cents in retail sales for every additional dollar in foodservice sales. In most cases, the additional space, equipment and effort is NOT worth the payout.

So why am I REALLY excited to open an Adagio store with seating for up to 54? Why am I looking for a partner to create a menu of tea infused or inspired food items?

Adagio’s second store will be in 1,100 square feet in a corner location at Old Orchard mall in Skokie, IL (read more here). Old Orchard is an outdoor mall, and right outside our door is a beautiful courtyard with a large fountain and a lot of beautiful landscaping. I’ve negotiated with the mall management for the right to put Adagio-branded tables and chairs on this patio so that our customers are able to enjoy their tea outside during the 2/3 of the year that are conducive to sitting outside in the Chicago area.

There are three reasons that this opportunity really appeals to me. First, because the seating area is free. I don’t need to sell an extra $500,000 per year to pay for it. Second, because the seating area is outside of the store. I’m able to focus my merchandising and staff on engaging the customer and driving retail sales within the store. Third, because the patio will be closed during the holiday season when I want our efforts to be focused on Christmas shoppers, not students with their laptops. I still am completely opposed to indoor seating and food-service in an Adagio store, but this is a perfect example of an opportunity too good to pass up.

It turned out that this patio and the service element was critical to landing the space. Teavana has a store in Old Orchard mall as well, and while they don’t have a contractual exclusive, the developer didn’t want to just bring in another Teavana. They wanted to make sure that our model was different enough to add value to the Old Orchard offering and attract additional shoppers.

At the end of the day, the patio provides an incredible opportunity to differentiate Adagio, offer a compelling tea experience to the customer, and attract consumers who might otherwise walk right past our store without ever noticing us. The cost will be negligible in the larger scheme of the operation and the upside is tremendous.

The moral of the story is that the only thing more important than a solid business plan and accurate understanding of your core is…

Flexibility. ☺

Adagio Teas