How to Run a Coffee Shop? Why Can Coffee Shops in Shanghai Keep Proliferating?

The Reality Behind Shanghai's Booming Coffee Scene

It's well-known that the speed at which coffee shops open in Shanghai outpaces even a Lamborghini. In this city where the coffee industry has reached "turbulent waters," coffee shops continue to proliferate. Is it really because running a coffee shop is easy?

According to the "Shanghai 2021 Specialty Coffee Consumption Observation" report released by the Coffee Professional Committee of the Shanghai Food Industry Association last November, the boom in Shanghai's coffee shops began in 2018. By November 2021, Shanghai had approximately 7,200 registered coffee shops. From January to November 2021, about 951 new coffee shops opened, representing an annual increase of 41.5%. Based on this data, the current number of coffee shops in Shanghai is approximately 7,500.

In addition to the rapid growth caused by international and domestic brands competing for market share, many private coffee shops specializing in specialty coffee, pour-over coffee, and creative coffee have also mushroomed in the past 2-3 years. Standing out amidst this "cover" of bamboo forests has become a problem that every "bamboo shoot" must consider before emerging.

Finding Your Place in a Competitive Market

If you want to enter this fiercely competitive coffee market, taking the first step successfully is crucial. Starting with pricing inevitably puts you at a disadvantage against chain coffee shops... Therefore, new coffee shops must find their own unique characteristics and positioning to have a chance to establish themselves in this market.

Shanghai's coffee market has developed rapidly for two reasons: on one hand, the city's development and positioning have gradually cultivated coffee-drinking habits (note: this is not a necessity, but rather drinking for the sake of drinking. For general consumers, coffee is just a beverage – it needs to taste good and be special; very few people pursue coffee flavors); on the other hand, the pandemic has changed consumption patterns, making coffee shops one of the preferred offline social venues for the younger generation. With demand comes supply.

The main consumer age group in Shanghai is 20-40 years old, with women accounting for 60%. With continuous social development, Shanghai's consumers come from diverse backgrounds and have varied preferences. Coupled with a love for novelty, people don't take their first sip of coffee immediately after purchasing it at a coffee shop. Instead, they quickly take photos while the coffee still looks presentable, then upload them to social media platforms to share their lives.

Thus, fueled by the internet, going to a coffee shop is no longer just about drinking coffee – taking photos and "checking in" has become the "real purpose." Consequently, many coffee shops don't focus on product quality but instead emphasize their store's uniqueness and the distinctive appearance of their beverages, allowing their coffee brand to stand out in the colorful online world.

The Business Model Behind the Photos

In Shanghai, more than 7,000 coffee shops feature over 1,000 different decorative styles – Japanese, Korean, industrial, cave, retro... Regardless of the style, there are only two objectives: creating highly photogenic spaces. Investing money in advertising allows visitors to take plenty of beautiful photos and post them online, which in turn attracts the next wave of netizens. Once the shop makes money, it closes down. Then, using the same equipment, they open a shop with a different style and continue the same business model. This operation has created an illusion for many: although the coffee market is highly competitive, coffee shops continue to proliferate, making running a coffee shop seem like an easy task.

This has also led many "industry newcomers" to believe that opening a coffee shop only requires high-end equipment and unique decor to attract a steady stream of customers, allowing them to live their dream "coffee shop life." However, the reality is that only after being "ravaged" by the market do they realize that ideals and actual business operations are two different things. After being defeated by reality, they don't reflect on whether their business approach is problematic; instead, they choose to blame chain coffee shops for stealing their business...

The Two Approaches: Business vs. Passion

The difference between the two scenarios mentioned above is: one is playing the market, the other is opening a shop based on passion. Can passion really feed you? Obviously not! Let's do some calculations.

Many people believe equipment is crucial when opening a coffee shop, so they invest heavily in it... They also spend a lot on renovation to achieve their ideal store style. Adding rent, utilities, and labor costs, the initial investment easily reaches 100,000-200,000 yuan, and that's just the beginning.

A coffee shop doesn't generate business from day one – after all, consumers rarely choose unfamiliar establishments. At this stage, significant additional costs are needed for promotion. Daily expenses for materials, utilities, and labor continue to accumulate... Ideally, breaking even might be possible in six months, but reality shows that the path to profitability takes much longer than expected. During this period, not only money is consumed but also patience. Not only do you lose personal time, but you also work desperately every day. When you're only earning 10,000-20,000 yuan a month, you have to ask yourself: what about passion!

Don't assume that in a city where coffee competition has reached such extremes, the proliferation of coffee shops means the business is easy to run! That's because the people opening shops in Shanghai operate with business thinking, responding to market demand. It's impossible to survive on passion alone, let alone make money.

The Reality of Coffee Shop Business

But what if it's not in a big city? Wouldn't it work in a smaller city...? Running a coffee shop is a business – no matter where you open it, it's still a business. Don't try to convince yourself with the thought "I'm not trying to make money from the coffee shop," even if you're wealthy! A business that doesn't make money will quickly make you feel that running a coffee shop is meaningless.

Stop holding such idealistic notions about opening coffee shops! Keep passion for memories – running a business based on market demand is the fundamental survival strategy for any coffee shop.

Note: Images are sourced from the internet and do not specifically refer to the coffee shops pictured.

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