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The rise in the coffee shop: what gentrification means for global business

by Gavin Dow, MD of Coffee Central.

Coffee shops are on the rise around the world. Last year saw 21 out of 25 European countries report an expansion in their coffee shop industry, according to the Independent. Elsewhere in the world, Bloomberg reports that the Chinese coffee market grew several times faster than the global average in the decade leading up to 2014, while Mintel says that the ‘ready to drink’ coffee sector is expected to grow by around 67% in the USA between 2017 and 2022.

The connection between coffee shops and gentrification

The stats are all the more interesting because coffee shops never arise in a vacuum. A successful coffee shop needs to continually attract clients who live and work in the local area. Each shop is both a social and commercial environment that relies on people enjoying their time there and enjoying the products that they purchase.

This, in turn, relies on people having the disposable income and time that is free or flexible enough to allow them to spend time there. These requirements favour people in certain professions, income brackets and life stages. The group that most readily fits the bill around the world is young professionals.

It’s unclear whether new coffee shops bring the influx of young professionals or whether more young professionals in an area leads to more coffee shops, but there is a clear correlation in place. Many people see a rise of coffee shops as a sign that an area is changing and that the original population may soon be priced out of properties there.

This process is known as ‘gentrification’ – it’s the idea that the original working class population of an area is gradually displaced as a middle-class, young professional population moves in. It often begins with young professionals being priced out of the city centre itself and looking to areas just outside for accommodation, which tend to be more affordable.

As the population of an area changes, so too do the kinds of businesses that can succeed there. Coffee shops are one example, but other businesses that are able to cater to the tastes of a changing population are likely to arise.

The rise in the coffee shop: what gentrification means for global business-2

What does gentrification mean for global businesses?

Everything that has been described so far has been local in scale. In reality, changing neighbourhoods can shape the larger business landscape of an area, creating opportunities for larger businesses that didn’t exist before, both in terms of real estate and business opportunities.

In countries like the UK and the USA, where big, wealthy cities already exist throughout, gentrification in smaller suburbs and neighbourhoods is unlikely to cause ripples in the global business market. However, the rise of the coffee shop is a phenomenon which, in some developing countries, could be a sign of new audiences opening up to products and services from the global market.

Regardless of the culture that they appear in, modern coffee shops tend to signal the presence of a young professional demographic with expendable income. While the nature of this group does vary from country to country, they also tend to be a demographic with ready access to the internet and more willingness to participate in a global market than older generations.

Coffee shops and the rise of flexible working

Coffee shops also go hand in hand with a global increase in remote and flexible working. The way that employees around the world work is changing rapidly. According to a Regus study, about 54% of the world’s workers say that they work outside of the main office for 2.5 days a week or more.

In some countries, this percentage is more pronounced than others. In China, where we already took note of the rapid increase in coffee shop numbers, the percentage of remote workers is 65% – the highest in the world. India, Mexico, South Africa, France and Japan are also noticeably above the global average. Interestingly, the UK and USA come in slightly below the average, with 47% and 53% of employees working remotely respectively.

The study also reports that remote workers still tend to work in city centres, rather than staying at home. Coffee shops attract their fair share of workers, along with the increasing number of co-working spaces that are emerging around the world.

Speaking to the Guardian, one owner of coffee shop workspaces in London said that coffee shops draw professionals in because they offer social interaction and community that is often lost when working at home. In some cases, these spaces can become an office outside the office that keeps employees motivated and engaged, whereas working at home can lead to distraction and a lack of productivity.

Coffee shops around the world might not be the cause for more remote working – that lies in more complex social factors such as the displacement of working populations and the rise of wireless technology – but they certainly rise up in areas with large remote working populations.

For business owners around the world who are still trying to keep everyone in the same office, perhaps a greater knowledge of spaces like these new coffee shops will be the encouragement you need to allow your employees more flexibility.

They also offer a more informal space for meetings and interviews. While not every company will want to operate in this way, it may be worth considering the benefits from conducting certain meetings in a more relaxed location away from the office. People tend to be more at ease in a neutral space like a coffee shop than they would be in a corporate office environment.

Key takeaways from the global rise in coffee shops

There are three key points to take away from the data around the rise in coffee shops. The first is that they are the sign of changing working populations, often correlating with a rise of young professionals in a certain neighbourhood, suburb or city.

The second is that the rise also correlates with a rise in flexible working habits. Coffee shops provide fantastic environments in which remote workers can feel both socially connected and focused.

And finally, coffee shops offer alternative environments for important business activities. It might seem odd to take a meeting or interview out of the office, but doing so can relax the participants and foster more honesty, creativity and engagement with the topic at hand.