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Why Retail Brands Are Racing To Open In-Store Coffee Shops · THE DAILY BRIEF

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  Speaker 1: It's beginning to feel like every brand suddenly has a cafe,
• 0:05
  Speaker 1: from Louis Vatan to Capital One and Coach thank You,
• 0:11
  Speaker 1: buy Me My.
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  Speaker 2: Dream perst the fusilg key floor.
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  Speaker 1: Is anyone going to.
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  Speaker 3: Tell me this cafe?
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  Speaker 1: I'm at the Uniglow store on Fifth Avenue in New
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  Speaker 1: York City. It's one of their global flagship locations, and
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  Speaker 1: at first you see jeans and shirts when you walk
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  Speaker 1: in the store. But go to the second level and
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  Speaker 1: you'll see this, a coffee bar tucked away into the
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  Speaker 1: corner of the store.
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  Speaker 4: We're trying to make more like a service floor where
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  Speaker 4: people can pick up their clothing, repair their clothing, customize
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  Speaker 4: their clothing. Why door so enjoying a great coffee or great.
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  Speaker 2: Michild I've long said that the easiest way to get
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  Speaker 2: in the experienced business is to add a cafe, because
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  Speaker 2: it engages all five senses and it gets customers to
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  Speaker 2: spend more time with you.
• 0:53
  Speaker 1: CNBC took a look at why retailers like Uniglow are
• 0:56
  Speaker 1: getting into the coffee business.
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  Speaker 3: Share less.
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  Speaker 1: Companies adding branded cafes to their stores is becoming increasingly common,
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  Speaker 1: but there were some early pioneers of the concept. Barnes
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  Speaker 1: and Noble partnered with Starbucks starting in nineteen ninety three
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  Speaker 1: to introduce cafes in its bookstores. Target also partnered with
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  Speaker 1: Starbucks starting in nineteen ninety nine. Over a decade later,
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  Speaker 1: both Ralph Lauren and Capital One opened their first cafes
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  Speaker 1: in New York City and Boston, respectively.
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  Speaker 4: One thing that we.
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  Speaker 5: Knew from the beginning would be important with cafes was
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  Speaker 5: that the environment was very welcoming and that people didn't
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  Speaker 5: feel like they were being sold to. And so from
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  Speaker 5: the very beginning of the cafes and continuing today, we
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  Speaker 5: do not have a sales focus for the Capital One
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  Speaker 5: associates who work there.
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  Speaker 1: Capital One told CNBC that it now operates sixty five
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  Speaker 1: cafes nationally, and Ralph Lauren operates over forty cafes across
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  Speaker 1: the world in cities like London, Barcelona, Hong Kong and Singapore.
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  Speaker 1: Another early adopter was Aritzia with its Aok cafe, which
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  Speaker 1: started in twenty eighteen and is scaled to thirteen locations.
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  Speaker 1: These established players have found a concept that works and
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  Speaker 1: are continuing to grow, but the past five years has
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  Speaker 1: seen a wave of newcomers Uniglow, for example, opened its
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  Speaker 1: first cafe in Tokyo in twenty twenty one. This New
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  Speaker 1: York City Uniglow Coffee is the first location in the
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  Speaker 1: United States it opened in March of twenty twenty five,
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  Speaker 1: but globally the company has a total of nine coffee
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  Speaker 1: shop locations.
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  Speaker 4: The reason to wait until twenty twenty five was ready
• 2:40
  Speaker 4: to make sure that we are being recognized as a
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  Speaker 4: brand in this market. Now we have a strong base,
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  Speaker 4: we can continue to grow and add up news services
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  Speaker 4: and to continue to in as that shopping experence to
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  Speaker 4: the US customers.
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  Speaker 1: In twenty twenty four, Coach got in on the game too.
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  Speaker 1: The brand, which has seen a cultural resurgence amongst gen
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  Speaker 1: z so a revenue increase of twenty two percent In
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  Speaker 1: its most recently reported fiscal quarter. Coach opened its first
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  Speaker 1: cafe in Indonesia to test the offering. Since then, it
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  Speaker 1: has opened four in the US and over a dozen
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  Speaker 1: more internationally.
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  Speaker 6: The data that's been really really fascinating, as we're seeing
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  Speaker 6: double to triple digit increase in the retail store sales
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  Speaker 6: with having a coffee shop from the increased traffic.
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  Speaker 1: The trend has become especially prevalent in the US amongst
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  Speaker 1: luxury brands. Over the past few years, Fashion House LVMH
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  Speaker 1: opened a door cafe in Dallas, a Louis Vatan cafe
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  Speaker 1: in New York, and remodeled its Tiffany brands blue box cafe. Prada,
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  Speaker 1: which is not a part of LVMH, is also rumored
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  Speaker 1: to be opening a New York location in twenty twenty six,
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  Speaker 1: after opening cafes in London and Singapore for higher end brands.
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  Speaker 1: It also presents an opportunity for customers to make a
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  Speaker 1: purchase even if they wouldn't normally be able to afford
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  Speaker 1: to shop at the store. Sure, a coffee may run
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  Speaker 1: you upwards of nine dollars, but that's more of an
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  Speaker 1: attained luxury in stores where three or four digit price
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  Speaker 1: tags are the norm.
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  Speaker 6: We've actually seen a lot of younger customers come in
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  Speaker 6: thirteen fourteen years old, and we're seeing them be able
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  Speaker 6: to experience coach with some of the money that they
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  Speaker 6: may have learned from allowance and be able to have
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  Speaker 6: a pumpkin macha or a chocolate chip cookie. So we
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  Speaker 6: see it across all generations, but maybe using it for
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  Speaker 6: different ways and different reasons.
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  Speaker 1: And even if you are already buying from Coach. Sanders
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  Speaker 1: says that shoppers can afford a cup of coffee a
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  Speaker 1: lot more frequently than a handbag, But there are, of
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  Speaker 1: course additional costs associated with this type of venture. Coffee
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  Speaker 1: itself has become an expensive product, Volatile weather conditions for
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  Speaker 1: coffee growers, and more recently, sweeping US tariffs have sent
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  Speaker 1: prices soaring. The companies we spoke to are taking different
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  Speaker 1: approaches on operating the actual cafes. Uniclow and Coach are
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  Speaker 1: adding cafes to existing store locations. Capital One, on the
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  Speaker 1: other hand, says it's building locations with the cafes in mind,
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  Speaker 1: as they take up more space than a typical bank branch.
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  Speaker 1: The company then hands off operations to a third party.
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  Speaker 5: We provide the space, but Capital One actually doesn't operate
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  Speaker 5: the coffee and food and beverage sales and production in
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  Speaker 5: the cafes.
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  Speaker 1: One of the reasons that branded cafe concepts have ramped
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  Speaker 1: up over the past few years is in response to
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  Speaker 1: post pandemic changes in the retail landscape.
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  Speaker 3: So COVID had a huge effect because it really decimated
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  Speaker 3: the experience economy. And yes, we can still buy any
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  Speaker 3: goods that are out there, contact lesslie, we can have
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  Speaker 3: them delivered to our hole. And so what does it
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  Speaker 3: take to get people to go out to the stores right?
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  Speaker 3: You need to be able to have experiences that they value,
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  Speaker 3: and cafes again are the primary way to be able
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  Speaker 3: to do that.
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  Speaker 1: When retailers open coffee shops, it can increase their brand exposure,
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  Speaker 1: can also drive incremental foot traffic and keep shoppers inside
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  Speaker 1: their stores for longer.
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  Speaker 4: Primary reason for having a Unicode coffee in our stores
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  Speaker 4: obviously to bring a more customers to the stall, but
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  Speaker 4: it also to have an inviting space for them when
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  Speaker 4: they come shopping. The interest behind and the concept behind
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  Speaker 4: is to make you feel at home, to be part
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  Speaker 4: of the brand, to fail the brand, to also spread
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  Speaker 4: the Japanese culture. Because we are a Japanese company.
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  Speaker 1: Capital one situation is a bit more unique. It's not
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  Speaker 1: an apparel retailer. So cafes offer a bit of a
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  Speaker 1: different opportunity.
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  Speaker 5: The cafes are meant to be a showroom of capital.
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  Speaker 1: Wine.
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  Speaker 5: Bank accounts and credit cards and money are things that
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  Speaker 5: don't always feel tangible, and so the cafes can show
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  Speaker 5: you know, can show up as a personification of what
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  Speaker 5: is capital.
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  Speaker 1: Wine, but across all types of companies, cafes create an
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  Speaker 1: opportunity for revenue growth in a saturated retail environment.
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  Speaker 3: If you design the cafe to be able to operate
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  Speaker 3: it at a profit, and there's no reason today's day's
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  Speaker 3: nage the people are paying for coffee that you can't
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  Speaker 3: do that. And yet it's a demand generator as well.
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  Speaker 3: It gets people to come in and may get them
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  Speaker 3: to make an extra visit every month or every quarter
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  Speaker 3: or every year, may get them to buy more because
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  Speaker 3: they've slowed down and they looked at things.
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  Speaker 4: I think we look at two aspects right when we
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  Speaker 4: open the Unito coffee. There's one aspect that is making profits,
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  Speaker 4: which we are obviously monitoring week over a week, month
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  Speaker 4: of a month. And then the second aspect is really
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  Speaker 4: about the customer. Really the reason why we open this coffee.
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  Speaker 4: It's a really help a customer and enhance their shopping experience.
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  Speaker 1: As more and more brands open their own cafes, the
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  Speaker 1: retail coffee concept will become increasingly commoditized.
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  Speaker 3: With something that you need to refresh to think about
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  Speaker 3: how you change us over time, and you need to
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  Speaker 3: design it uniquely right. It's not enough like Barnes and
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  Speaker 3: Noble originally putting Starbucks in the stores. You have to
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  Speaker 3: create your own brand. The Tiffany Bluebox Cafe a beautiful
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  Speaker 3: example of that, so that it's not just about the coffee,
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  Speaker 3: it's about immersing you in the brand values, in the
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  Speaker 3: brand colors, in what it stands for.
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  Speaker 1: One of coaches best selling bags is called the Tabby.
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  Speaker 1: It's created a special cake at its cafes to complement
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  Speaker 1: the product.
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  Speaker 6: Looking at changing the color of our Tabby cakes like
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  Speaker 6: throughout the seasons, We're also looking and working with our
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  Speaker 6: product development teams on what are some of the new
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  Speaker 6: icons or things that might be coming at as a brand,
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  Speaker 6: and then how do we actually turn those into something
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  Speaker 6: that our customers can eat or drink.
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  Speaker 3: I do think that brands look at each other and
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  Speaker 3: see what they're doing. There is a little bit of
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  Speaker 3: a herd mentality going on regarding that, and I think
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  Speaker 3: that is the case with the cafes. But I think
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  Speaker 3: also that everyone is doing it differently. Everyone that I've
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  Speaker 3: seen has their own takes on it.
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  Speaker 1: Capital One, for example, makes the experience and more rewarding
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  Speaker 1: for its banking customers cardholders of Capital One and Discover,
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  Speaker 1: which it acquired in a thirty five billion dollar stock
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  Speaker 1: deal in twenty twenty five, get fifty percent off on
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  Speaker 1: beverage purchases. Another differentiating factor between these different companies is
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  Speaker 1: the locations of their cafes.
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  Speaker 5: We place the cafes in premiums destinations in a city,
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  Speaker 5: in areas where there are a lot of people, and
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  Speaker 5: because of that, we need fewer of them. While we
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  Speaker 5: may invest in a large cafe on a very busy
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  Speaker 5: street corner with a more traditional branch strategy, we would
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  Speaker 5: need to have many, many more branches to.
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  Speaker 1: Cover that area, Whereas per Coach, its strategy with cafes
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  Speaker 1: is focused on outlet locations.
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  Speaker 6: Specifically, we see an opportunity for our customers who may
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  Speaker 6: not know the difference between a retail store at an
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  Speaker 6: outlet store. It's just their mall, right, They're just going
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  Speaker 6: to hang out with their friends or with their family,
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  Speaker 6: or have an experience in the mall. We believe it's
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  Speaker 6: a commercial venture that's scalable throughout the country.
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  Speaker 1: Coach said it expects to be opening twelve to fifteen
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  Speaker 1: cafes per year moving forward, and Capital One said it
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  Speaker 1: had openings planned for twenty twenty six, but when it
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  Speaker 1: disclosed a number. Uniglow, on the other hand, is taking
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  Speaker 1: a more tempered approach.
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  Speaker 4: For twenty twenty six. So far, we don't have yet
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  Speaker 4: a location confirm. This is a slow, very strategic way
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  Speaker 4: of thinking. We want to make sure that first, you know,
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  Speaker 4: we hear from our customers at Fifth Avenue, that we
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  Speaker 4: understand whether they're looking for when they come to Unico Coffee,
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  Speaker 4: what beverage is, what pastries, what other services can we
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  Speaker 4: bring to them. Once we have a clear understanding, we
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  Speaker 4: will continue to expand to other locations.