Businessman Marius Ghenea, who has developed his business around online retail, closed the Testa Rossa coffee shops in Liberty Center and Baneasa Shopping City in Bucharest and is to look for street front space to implement the concept he brought on the Romanian market in the second half of 2008.
“I saw in the first few months of the year that putting coffee shops in malls is not the right thing to do at this time, because traffic is very low. We decided to close. As an entrepreneur you have to realise it is time to accept losses, as well, and we are talking here about costs that we can no longer recover, such as those pertaining to the furnishing of the space, to promoting the location,” Marius Ghenea told ZF. He will not drop the brand, though, but will relaunch it in a street front version in 2010. The closing of the two coffee shops in which he had invested 450,000 euros in less than one year caused Ghenea a loss he “we would not commit to paper yet”, but which can be regarded as one of the few hiccups in his business, considering he has only grown his own companies, selling those that reached maturity.
The decision to close the two coffee shops in malls was made as a result of the decline in traffic and implicitly in the sales of the company.
“We are in talks with several owners for street front space, but have not signed any contract yet. We have also had propositions to go to other shopping centres, but realised results there were very poor. Well chosen street front locations are the solution,” said Marius Ghenea, who admits that he will open a coffee shop in the first part of next year at the earliest, while the rest of the shops will be launched based on a “look before you leap” principle.
Italian Coffee Concept, the company used to introduce the Testa Rossa brand in Romania last year announced it would open eight coffee shops in three years. Ghenea says he will stick to the plan but starting with 2010, which he sees as slow for coffee shop business as this year.
“Consumers will refrain from making expenses that are not strictly necessary. If funds for relaxation and leisure are not completely cut, they will account for a lower share in the Romanians’ purse, which will not be as full as before. However, coffee culture is only beginning, which is why the market might grow over the coming years,” Ghenea believes.
Many entrepreneurs have started to really consider the possibility to relocate some shops from shopping centres because of the sharp decline in traffic.
Dragos Petrescu, owner of the City Grill restaurants, Carul cu Bere, Hanu’ Berarilor, Buongiorno and of the City Cafe coffee shops, whose turnover stood at about 15.2 million euros in 2008, has recently announced that the development of his business will be done only by opening standalone cafes, without considering shopping centres, where he has closed unprofitable shops and will no longer open anything, not even if (offered the space) “for free”.
Other players decided not to go to malls from the beginning, with Tudor Niculescu of Turabo and Florin Balu, owner of Snack Attack fast food chain, being just two of those that have expanded in street front locations and considered office buildings as an option.