What is driving independent coffee shop closures?

Independent cafes are closing quietly across many cities, and coffee lovers report that nearly half the shops in their saved lists are now marked closed, including places with thousands of positive reviews. Chain price wars squeeze smaller operators, while weak business strategy and a lack of differentiation make survival harder, even as China's coffee market reached 180.6 billion yuan in 2023.

Chain brands keep expanding, with MANNER past ten thousand stores and Luckin and Cotti moving overseas, so competition coffee retail faces pressure on pricing and foot traffic. The closures spread from Beijing, Shanghai, Guangzhou, and Shenzhen to other cities. Running a cafe still requires clear preparation: a defined concept, cost control, and a reason for customers to return.

In 2023, China's coffee market reached 180.6 billion yuan, chain brands are accelerating expansion, MANNER has over ten thousand stores, and Luckin and Cotti are going overseas—it all looks like prosperity. However, in social media bookmarks, many coffee lovers have discovered that nearly half of the independent cafes they once saved are marked "closed," including many high-quality small shops with thousands of positive reviews. From Beijing, Shanghai, Guangzhou, and Shenzhen to other cities, this phenomenon is spreading. The price war among chain brands has squeezed the living space of independent shops, while poor business strategies and a lack of differentiation have also made it difficult for many stores to survive. What kind of preparation and thinking does running a coffee shop actually require? This article takes you deeper into the real dilemmas independent cafes face and ways to break through.

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The tourism industry has been booming this year. Many friends have already prepared their travel gear and are just waiting for the holiday to arrive so they can take a spontaneous trip. Some may flip through travel guides for a certain place on various social platforms before departure, plan their route in advance, sort out possible situations they may encounter during the journey, and come up with corresponding solutions.

For those who are passionate about food, among the essentials of food, clothing, accommodation, and transportation, they will certainly put more thought into "food." Opening their long-accumulated saved list, they originally intended to confirm the exact location of a favorite cafe, only to unexpectedly find that the shop had already been marked as closed. Continuing to scroll down, of the cafes saved to bookmarks three years ago, nearly half had become "suspended and closed." It is worth noting that among these closed shops, some had accumulated thousands of reviews and were once places local coffee lovers frequented often, yet their disappearance came with almost no warning.

The phenomenon of cafes in bookmarks closing does not appear only in one particular city. In areas with a high concentration of cafes, such as Beijing, Shanghai, Guangzhou, and Shenzhen, this situation is especially prominent. Many netizens report that they had previously saved more than a dozen independent cafes one after another, and now when they open the list again, about half can no longer be visited.

The rapid expansion of chain coffee brands, MANNER surpassing ten thousand stores, Luckin and Cotti stores spreading overseas, and Frost & Sullivan data showing that China's coffee industry market size reached 180.6 billion yuan in 2023—all of this can make the public think that the current coffee market has unlimited prospects.

However, the reality is that a large number of independent cafes are already on an extremely dangerous edge. Every off-season, many independent cafe operators joke about themselves: opening the door every day is not running a business, but counting down to closing. Everyone wants a bite of the big cake that is the coffee market, but most of those who can break through the siege and actually get a bite are not independent cafe owners who started businesses just for a novelty.

Some netizens believe that many independent cafes "all open by following trends, then fall with the wind" as influencer shops. These owners do not understand the market and simply open stores after seeing others' coffee shops make money, ultimately failing to keep operating and having to close stores to cut losses. Other netizens say that the coffee shops they like and have saved are all run with care by the shop manager, but perhaps because they did not market themselves into influencer shops and lacked foot traffic, they could not hold on and ended up heading toward the outcome of "closing."

It cannot be denied that the price war among chain coffee brands has made coffee consumers realize that they can buy a cup of coffee that meets their needs at a cheaper price. Price competition has also invisibly squeezed the profit margins of independent cafes, making many cafe owners feel that they cannot keep operating because they "cannot outplay capital."

But in addition to the rapid expansion of chain coffee brands and the impact of low-priced coffee, the reason some independent cafes ultimately end hastily may also lie in the owner's unsuitable business strategy, the shop's lack of differentiation, and so on.

Running a coffee shop is a field of knowledge. It requires not only doing market research and understanding the industry before opening, but also budgeting the initial investment, the costs of later operations, and so on. Only by covering all aspects can one better withstand the pressures coming from all sides during operation after opening, and only then can one go further on the coffee track.

Image source: Internet

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The above content is compiled by CoffeeHunters, a coffee news website.