Anatomy of a Pivot - Wyatt Cavalier of Empty Pocket Traders shares his thoughts

by Startacus Admin

One year ago, we launched Empty Pocket Traders with the aim of bringing gourmet Fairtrade coffee to our customers’ door--through their letterboxes to be precise. It’s gone well in many respects but isn’t without its challenges, and those challenges have caused us to rethink our business model to some degree. Some of the issues:

1. Subscriptions--an innovative model when we launched--is now a much more crowded field, and it’s way more labour intensive than we thought it would be. Because we’re a two-person company that hasn’t sought outside funding, we’re now behind the curve rather than out in front of it.

1a. More specifically (and more troubling), a major national brand recently bought one of our competitors with the aim of pumping £millions into our exact market.

2. The price of coffee has gone up 40% this year. This is making it tougher for us to source really good coffee for reasonable prices unless we’re buying up loads of it.

3. The other main cost is around customer acquisition, and it’s very much a numbers game. Adwords, referrals, discount sites. Customer acquisition like this feels and is very wholesale. It’s all about formulae and calculations.

4. The tech behind supporting a large subscription-based infrastructure is much more complicated than you’d think, and there’s no good out of the box solution for this. Because the tech is wonky, delivery/payment errors are common, which doesn’t make anyone’s day better. As a corollary, in order to be profitable (see coffee costs, above), you need thousands of customers, which means maintaining a personal connection is really really difficult.

So we were faced with increased competition, decreasing margins, an infrastructure that can’t really support growth, and a distinct lack of fun. You’ve got two options in this sort of situation: (1) make the sort of financial and emotional investment required to compete against the better-funded folks in your industry or (2) tear up the rule book and start asking some tough questions.

We’ve opted for number 2, which meant we had to do the sort of strategic analysis typically reserved for business school back rooms. What are our strengths? Weaknesses? How much are we willing to commit to the business? What’s working and what’s not? It turns out we’re really good at (a) finding great coffee, (b) looking after our customers, (c) selling coffee in a personal way, (d) working with the big picture, and (e) creating interesting products and propositions. We’re bad at (a) admin, (b) dealing with tech issues, (c) spending loads on marketing, and (d) getting excited about razor thin margins. We’d also like things to be more fun.

So we’ve decided to build out the business with a focus on B2B sales with our new brand, Honest Coffees. We’ll be delivering coffee to awesome offices, restaurant start-ups, worthwhile charities--companies doing really amazing things full of brilliant coffee-fueled people. This ticks off most of the boxes above letting us come up with great ideas, source delicious coffee, and maintain personal relationships with all our clients. It’s also an opportunity to slightly disrupt a pretty complacent market. There are only a few big players doing this, and their propositions are confusing, unfriendly, and impersonal. We’re aiming to be the opposite of all that.

It also makes financial sense: One business client can be worth the same--financially--as 50 individuals, which means we need far fewer of them, which in turn means we can maintain a more personal relationship. And we don’t need massive infrastructure to deal with thousands of deliveries that might go wrong.

We’ll continue with the B2C side of things for now while we sort out just what we want to do with it, so our existing customers will of course keep getting their coffee...just hopefully in a slightly more seamless way going forward!

You can learn more about gourmet Fairtrade coffee delivery for offices and trades by emailing [email protected] or calling 07446 935 764. We’re also running an exclusive promotion for Startacus members: 50% off our retail price for life. That’s £15/kg!

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Published on: 17th June 2014