> To fix the conversion rates, John moved the "cash only" sign inside, and on top of that started accepting checks, foreign currency, and even the I.O.U's.
In my mind, this is the highlight of the article. If you carry out your business in a friendly and unique way you can win customers and do things that are very difficult to pull off otherwise.
> If you carry out your business in a friendly and unique way you can win customers and do things that are very difficult to pull off otherwise.
"cash only" seems unfriendly. You can get away with not being friendly as long as you are neutral and professional, but anything that gives a feeling of hostility is going to consciously or unconsciously drive away people.
I won't go to a "cash only" shop because most of the times I pay with cards and to me, it reads like the shop is asking me not to come in.
When he went for a list of currencies, rather than saying pay US dollars or don't come in, it read like we have issues with processing cards, but please do come in - we will see what we can do.
"When I read this, I wondered if it was about offering consumers the right number of choices. Cash Only sounds restrictive, while a laundry list of types of currency seems like you have options."
(Why did this comment from clarebear get killed? Anyway...)
I agree. Even though the vast majority of customers will never use any of those choices except cash and iou, simply having them sends the message that the shop is very open and flexible.
That's why i suppose best businesses aren't the ones that were built to sell (like about.me), but rather the ones built to solve a problem and become a really good product (heroku).
Isn't offering an I.O.U. exactly what a credit card is supposed to do. They are doing such a bad job for merchants he would rather run the I.O.U. service himself than use their product. It seems like a business ripe for disruption - who really likes Visa/MC/AMEX?
I miss NYC so much; SF is just such a disappointment as a city.
My bodega 2 doors down in the upper east side was a full deli with fresh chicken, turkey, and pork everyday; $6 huge sandwiches made fresh; coffee; and they were open 24 hours a day. Plus they took credit -- once the people at the register recognized you, you could could run a tab up to a couple hundred dollars and pay on the first of the month. It was wonderful to go downstairs with just the keys in my pocket and have someone who remembered what I wanted for breakfast, that I like my eggs fried (unlike SF where they normally microwave in a plastic bowl), and that I take coffee with just a hint of cream and no sugar. Plus, from their perspective, I paid the tab every month in cash so no fees. I've never found anything like this in SF.
I mean, Andy at Que Tal recognizes me, but it's not the same :(
An important side lesson here is not to take common industry practices at face value. (In this case, it was the conventional wisdom that 'All coffee shops are expected to have baked goods, and they sell baked goods at a loss').
In any business, big or small, tech or otherwise, there are hundreds of strategic and tactical levers we can pull on a daily basis. Many of these levers we don't even realize exist, because we're so used to thinking of them as fixed in place.
One of the coffee shops I frequent also accepts IOUs, plus they do one other thing: you pay as you leave, not when you get your coffee. Now, this has two benefits:
First, means that the barista has to keep track of things...they have to actually have a relationship and interaction with the customer. That's very positive.
Second, it means that I often go get a second cup, or a pastry, because I haven't closed out my bill yet.
one consequence of labour being so much cheaper here in india is that even some of the large chain coffee shops have waiters and a pay-as-you-leave policy.
Nice post that reminds us that customer development techniques are not new to the tech community, and we can learn a lot from watching traditional brick and mortar stores use these same techniques to enhance their business.
Indeed, isn't that great! We read all these popular books on how to make startups better, while sometimes all we need to do is open our eyes and watch others.
Good article, but the most interesting part of the story (for me) was casually summarized in one sentence. What amazes me is that he decided to start his first business at the age of 61 - wow! Major kudos to this guy for finally deciding to take a leap at an age when others are merely contemplating if their savings will be enough to fund retirement - that takes serious balls.
Sure, John made some great changes and saved his business, but that's what good entrepreneurs do - adapt and move on. He certainly deserves the credit for that, no doubt.
Being a cash-only business is an annoying disservice to your customers. It's a sign that you're not interested in the value of convenience. It's a regressive attitude to lean on cash, and oftentimes a sign that you're not interested in keeping honest books.
If you're not willing to pay what is almost universally accepted as an operating cost in modern society, you're setting yourself up to be left in the dust, and quickly. People are about to start paying for everyday transactions using their phones! If you have a problem with payment processors biting into your margins, then pass the buck onto your customers (even as a credit card usage fee), but never take away a payment option.
I completely disagree with what you're saying, but it may be because of the city that I'm living in - Columbia, SC. Many, many shops and stores down here don't take credit cards and it is not rude to the customer at all. In most cases the store has been around since before credit cards were popular and it is you who should adapt to the store, not the other way around. And there will always be stores that couldn't function with the cost of processing credit cards (not only the transaction cost, but the time and equipment cost to setup and maintain a processing system).
Basically you learn to have an extra $20 on you when you're walking around certain areas of the city and it's not a big deal at all.
My absolute favorite breakfast joint does not take CC. The place is packed every day, and consistently gets voted best breakfast in my city. If you provide a good product, customers will put up with a minor inconvenience like walking half a block to the bank to withdraw some cash.
If you are a patron at a place you like, and you want to support them, you pay in cash, and its polite of you to do so. Thats a little bit extra for the establishment and a little less for Visa/EDS/Chase or whatever payment chain your transaction flows through.
I think that locally owned stores where the typical transaction is less than $5 are an exception. (Does this even describe anything other than local coffee shops?) I pay cash for my coffee everywhere I go. People typically don't go to locally owned shops for the convenience, but for the charm. And if you're a regular, then you know to carry some cash.
Coming from a smaller city in Florida I was surprised at how many cash-only restaurants there are in Berkeley, I mean, it's the Bay!
Granted, Berkeley seems to have its own notion of what it's culture should be and people don't seem to mind paying cash only. I think it's important to realize that you are projecting your own expectations onto other people's products, and in their minds they are perfectly happy losing your business so that they can focus on cultivating the kind of customer base they want.
Take Starbucks as an example of the opposite extreme, they take credit cards, drive thru, have uncomfortable chairs and loud music to discourage seating all in the effort to move as much coffee as possible. Starbucks does pretty well, but it's probably in this guys best interest not to try and copy Starbucks.
In Austria you can only pay by card in chains or touristy places. Even there it is socially unacceptable for amounts less than 10 Euros. I always cringe when I am in the States or somewhere like Argentina where people pay for a coffee with a CC. It is so slow. Especially in Argentina where you need to show an ID. Great way to create extra jobs by making something less quick through technology though.
You are talking for the USA only. Pretty much everywhere else, using (and accepting) credit cards is the exception, not the norm, and not even considered convenient by most people.
Sounds like his business is dying as he cuts parts away. If he could get the right amount of pastries ordered, why would he not make money? You sell half, so order half. It just sounds like he wasn't paying much attention when he wasn't in financial trouble.
Sounds like a pretty reactionary guy. I might agree that credit companies exploit small businesses, but a bakery too? Everyone is out to get this guy.
I just hope he doesn't get his own ATM in his business instead of taking credit cards.
It is probably more subtle than that. You have to have a surplus of goods so there is selection. There needs to be enough pastries on display so that people will be able to find something they want.
And when money was flowing, he could afford to sell pastries at a loss to keep his customers happy. When he couldn't afford it anymore he was forced to change. Perfectly normal. What is out of the ordinary is how he reexamined his assumptions and created a better solution -- instead of hamhandedly cutting pastries altogether.
I think it was more he changed the product mix to something that his customers wanted. He replaced a variety of custom/daily baked goods (cookies, muffins, croissants and whatever else), that he was struggling to sell out every day at likely a buck or two with 25 cent store bought donuts that led to more sales of his higher margin items.
Exactly what the guys above said and more. With a coffee shop, you can't order just-in-time, rather you are forced to order a surplus by the baker. They don't want to deliver 2 donuts and a bagel, rather they make you order a bucket of stuff... every day! Now John doesn't have to do any of it; all he needs is to wake up 20 minutes earlier and put the bread in the oven!
Are we sure these are lessons we want to take? Forcing a user to pay with currency (let alone foreign) makes accounting harder, and renders their shop useless to compete with other shops that do have card readers for a very large percentage of people. Then he moved the cash only sign inside instead of realizing that customers want to pay with their cards and adapting to his customers' needs. Lastly, he decided on taking the easy, low-quality route with his baked goods. Is that really future proof? I don't think he's acquiring any new customers by reselling boxed donuts - and his margins are very low. Why is he getting into the competitive baked goods market in the first place? Why not partner with a local bakery that produces high quality food stuffs as a barter?
I think you are missing a very significant point: without doing these things, he wouldn't survive. The article suggests that he couldn't afford the new cash register at the time, so he made the best of his situation.
Future-proofing your business is great, but if you can't hold on long enough to even exist in the future, then it's premature optimization.
1. He only loses to other shops in the case where customers dan't or won't pay with cash (this is a subset, and probably a minority, of customers). In return he saves money on a computer kiosk and the merchant fees on his transactions.
2. If he does not take plastic, then people who only pay with plastic are not his customers. Their needs are consequently irrelevant.
3. the $.25 donut is a loss-leader to sell the $4 cup of coffee. Or you could look at it as a bonus of sorts. Compare: "Buy a $4.25 cup of coffee" with "Buy a $4.25 cup of coffee, get a free donut."
Accepting credit cards is done almost everywhere, but I wouldn't say that it's so assumed that not advertising that you don't take them is "tricking" customers. He offers a 100% interest free no collateral loan as an alternative.
You are making predictions about the future based on opinions that have not been verified.
The whole point of the article is that your intuitions about what is true or false is unreliable. Instead it is better to experiment with different options and measure the results. Choose the best option based on real data rather than unreliable intuitions.
Believe it or not, the donuts were sold out. In fact, locals started to come in just to get these donuts, while of course also buying coffee, beer, and whatever else was available. Nobody could turn down 25-cent pastry!
[+] [-] jpadvo|15 years ago|reply
In my mind, this is the highlight of the article. If you carry out your business in a friendly and unique way you can win customers and do things that are very difficult to pull off otherwise.
[+] [-] irahul|15 years ago|reply
"cash only" seems unfriendly. You can get away with not being friendly as long as you are neutral and professional, but anything that gives a feeling of hostility is going to consciously or unconsciously drive away people.
I won't go to a "cash only" shop because most of the times I pay with cards and to me, it reads like the shop is asking me not to come in.
When he went for a list of currencies, rather than saying pay US dollars or don't come in, it read like we have issues with processing cards, but please do come in - we will see what we can do.
[+] [-] jpadvo|15 years ago|reply
(Why did this comment from clarebear get killed? Anyway...)
I agree. Even though the vast majority of customers will never use any of those choices except cash and iou, simply having them sends the message that the shop is very open and flexible.
[+] [-] kirillzubovsky|15 years ago|reply
[+] [-] asmithmd1|15 years ago|reply
[+] [-] Androsynth|15 years ago|reply
[+] [-] dot|15 years ago|reply
[+] [-] earl|15 years ago|reply
My bodega 2 doors down in the upper east side was a full deli with fresh chicken, turkey, and pork everyday; $6 huge sandwiches made fresh; coffee; and they were open 24 hours a day. Plus they took credit -- once the people at the register recognized you, you could could run a tab up to a couple hundred dollars and pay on the first of the month. It was wonderful to go downstairs with just the keys in my pocket and have someone who remembered what I wanted for breakfast, that I like my eggs fried (unlike SF where they normally microwave in a plastic bowl), and that I take coffee with just a hint of cream and no sugar. Plus, from their perspective, I paid the tab every month in cash so no fees. I've never found anything like this in SF.
I mean, Andy at Que Tal recognizes me, but it's not the same :(
[+] [-] clarebear|15 years ago|reply
[deleted]
[+] [-] jonnathanson|15 years ago|reply
In any business, big or small, tech or otherwise, there are hundreds of strategic and tactical levers we can pull on a daily basis. Many of these levers we don't even realize exist, because we're so used to thinking of them as fixed in place.
[+] [-] true_religion|15 years ago|reply
What do you mean?
He still sound donuts and sold them at a small loss.
[+] [-] scottporad|15 years ago|reply
One of the coffee shops I frequent also accepts IOUs, plus they do one other thing: you pay as you leave, not when you get your coffee. Now, this has two benefits:
First, means that the barista has to keep track of things...they have to actually have a relationship and interaction with the customer. That's very positive.
Second, it means that I often go get a second cup, or a pastry, because I haven't closed out my bill yet.
[+] [-] zem|15 years ago|reply
[+] [-] railsjedi|15 years ago|reply
[+] [-] kirillzubovsky|15 years ago|reply
[+] [-] haberman|15 years ago|reply
[+] [-] colson04|15 years ago|reply
Sure, John made some great changes and saved his business, but that's what good entrepreneurs do - adapt and move on. He certainly deserves the credit for that, no doubt.
[+] [-] aviel|15 years ago|reply
[+] [-] JackDanger|15 years ago|reply
[+] [-] languagehacker|15 years ago|reply
If you're not willing to pay what is almost universally accepted as an operating cost in modern society, you're setting yourself up to be left in the dust, and quickly. People are about to start paying for everyday transactions using their phones! If you have a problem with payment processors biting into your margins, then pass the buck onto your customers (even as a credit card usage fee), but never take away a payment option.
[+] [-] samtp|15 years ago|reply
Basically you learn to have an extra $20 on you when you're walking around certain areas of the city and it's not a big deal at all.
[+] [-] furyg3|15 years ago|reply
Nearly every processor agreement stipulates that this is a no-no.
[+] [-] fr0sty|15 years ago|reply
Visa and Mastercard expressly prohibit surcharges for transactions made with their cards so that is not a workable solution.
[+] [-] vailripper|15 years ago|reply
[+] [-] chriserin|15 years ago|reply
[+] [-] scott_s|15 years ago|reply
[+] [-] enjalot|15 years ago|reply
Granted, Berkeley seems to have its own notion of what it's culture should be and people don't seem to mind paying cash only. I think it's important to realize that you are projecting your own expectations onto other people's products, and in their minds they are perfectly happy losing your business so that they can focus on cultivating the kind of customer base they want.
Take Starbucks as an example of the opposite extreme, they take credit cards, drive thru, have uncomfortable chairs and loud music to discourage seating all in the effort to move as much coffee as possible. Starbucks does pretty well, but it's probably in this guys best interest not to try and copy Starbucks.
[+] [-] nasmorn|15 years ago|reply
[+] [-] brazzy|15 years ago|reply
[+] [-] zem|15 years ago|reply
[+] [-] wyclif|15 years ago|reply
EDIT: Actually, this piece has quite a few spelling errors and typos in it. This needs a once-over by an editor.
[+] [-] kirillzubovsky|15 years ago|reply
[+] [-] sib1013|15 years ago|reply
[+] [-] bluekite2000|15 years ago|reply
[+] [-] adaniali|15 years ago|reply
[+] [-] ctdonath|15 years ago|reply
[+] [-] napierzaza|15 years ago|reply
Sounds like a pretty reactionary guy. I might agree that credit companies exploit small businesses, but a bakery too? Everyone is out to get this guy.
I just hope he doesn't get his own ATM in his business instead of taking credit cards.
[+] [-] jpadvo|15 years ago|reply
And when money was flowing, he could afford to sell pastries at a loss to keep his customers happy. When he couldn't afford it anymore he was forced to change. Perfectly normal. What is out of the ordinary is how he reexamined his assumptions and created a better solution -- instead of hamhandedly cutting pastries altogether.
[+] [-] michaelbuckbee|15 years ago|reply
[+] [-] kirillzubovsky|15 years ago|reply
[+] [-] unknown|15 years ago|reply
[deleted]
[+] [-] redrussak|15 years ago|reply
[+] [-] vnorby|15 years ago|reply
[+] [-] HeyLaughingBoy|15 years ago|reply
Future-proofing your business is great, but if you can't hold on long enough to even exist in the future, then it's premature optimization.
[+] [-] fr0sty|15 years ago|reply
2. If he does not take plastic, then people who only pay with plastic are not his customers. Their needs are consequently irrelevant.
3. the $.25 donut is a loss-leader to sell the $4 cup of coffee. Or you could look at it as a bonus of sorts. Compare: "Buy a $4.25 cup of coffee" with "Buy a $4.25 cup of coffee, get a free donut."
[+] [-] thasmin|15 years ago|reply
[+] [-] dusklight|15 years ago|reply
The whole point of the article is that your intuitions about what is true or false is unreliable. Instead it is better to experiment with different options and measure the results. Choose the best option based on real data rather than unreliable intuitions.
[+] [-] mattmanser|15 years ago|reply
Article says it all really. Don't assume.
[+] [-] scythe|15 years ago|reply
They were homemade for Stallman's sake!