The business manager of Monarch Books believes that opening up a café within the bookstore will increase profits. Unfortunately, the bookstore manager is wrong; in fact, such a move will likely result in a loss of revenue.

Book and Bean, a popular bookstore and coffee shop in Collegeville, Pennsylvania, has recently announced plans to open a competing store in the same town. Monarch Books, an independently owned business that has existed in the town for two decades, is concerned about the competition. In response, the business manager has recommended that Monarch Books replace its children’s books section with a coffee shop. Giving serious thought to this recommendation will likely result in two unappealing conclusions. Firstly, assuming the demographics of Collegeville remain unchanged, the customer base for children’s books will decline, reducing the store’s revenue. Secondly, introducing a café to the store will distract customers from its primary purpose, which is selling books, and could cause them to shop elsewhere for specialty coffee.

The business manager’s premise is that since Collegeville is becoming increasingly populated with older residents, customers will be attracted to Monarch Books’ café, especially if it sells specialty coffees, teas, and baked goods. However, this reasoning is flawed for several reasons. Collegeville’s population is steadily growing, yet the percentage of residents under age ten has also increased, according to the Census Bureau. This is a curious trend, as the median age of the town is 49. Although the population of Collegeville is projected to increase by 2,300 people between 2010 and 2030, the median age will continue to rise, reaching 50. Even if the population of Collegeville is very young, the proportion of children under ten will remain the same, meaning that the number of children likely shop in the bookstore, offsetting any losses in revenue if the coffee shop attracts fewer customers. Furthermore, even those residents who are over the age of ten will still need coffee. If Monarch Books fails to add a coffee shop, it will likely lose customers who prefer to read while sipping on a hot drink. Therefore, Monarch Books’ decision to replace its children’s books section with a coffee shop is likely ill-advised, as the bookstore will lose customers and be unable to compensate for these losses with its sale of books.

Another flaw in the business manager’s argument is that not all Collegeville residents enjoy drinking coffee. For example, college students, the primary target market of Book and Bean, tend to be frugal and prefer to spend their money eating out or on books rather than on coffee. In addition, a significant percentage of people who visit bookstores have young children, and while they may visit Monarch Books with their children, they will likely leave without buying any books. In this case, Monarch Books will lose customers who are unable to afford coffee and books, yet cannot afford to have children. Finally, many people enjoy browsing bookstores, either alone or with their children, without purchasing anything. For these customers, Monarch Books’ decision to replace its children’s books section with a coffee shop, while enticing, will likely result in a loss of revenue.

Even if Monarch Books’ decision to replace its children’s books section with a coffee shop were a wise one, the bookstore would still be faced with stiff competition, as Book and Bean is planning to open its new store in March of 2013. Book and Bean’s reputation for customer service and low prices, as well as its convenient location, will undoubtedly attract many customers. In addition, Book and Bean will advertise heavily, giving Monarch Books little time to advertise its café. Perhaps more importantly, Book and Bean will be located in the same shopping center as Monarch Books, meaning that customers will likely visit both stores. In this case, Monarch Books would be unlikely to attract enough customers to offset any loss in revenue if the coffee shop attracted more business. Alternatively, Book and Bean could open a second location, increasing its customer base and revenue.

If the assumption of declining sales due to an increase in the number of residents over age ten proves to be incorrect, Monarch Books may have to consider opening a coffee shop. However, the bookstore would be wise to consider several factors before choosing to locate a coffee shop in its store. First, Monarch Books should carefully evaluate its competition. If Book and Bean offers specialty coffee, baked goods, and free Wi-Fi, it is unlikely that Monarch Books’ café will compete successfully. On the other hand, if the bookstore’s customers prefer specialty coffee to books, it would be wise to locate the café somewhere other than in the main area of the store. In addition, Monarch Books should carefully review its expenses. If opening a coffee shop requires significant upgrades and staffing, the bookstore should reconsider its plans. Furthermore, if the bookstore’s customers prefer to purchase books online rather than in the store, it would be wise to place the café in an area of the store other than the main section, where there are fewer customers. Finally, the bookstore manager should consider whether local residents prefer specialty coffee to books. If the majority of customers do, then Monarch Books should consider opening a coffee shop. However, if the bookstore’s customers prefer traditional coffee to specialty coffee, the bookstore should locate its café in an area where it can attract more business.

For all of these reasons, Monarch Books should reject its manager’s recommendation to open a coffee shop in its store. Although Monarch Books’ bookstore will likely continue to thrive, opening a coffee shop will likely result in a decline in the store’s revenue, while possibly