Coffee Marketplaces: When a Stupid Idea Sounds Good

One topic keeps boiling up in the coffee community – and that’s coffee marketplaces. You could call them the “mini-Amazons” of our industry. In this article we’ll be focusing on German coffee marketplaces. However, there are equally relevant examples to be found in North America, Australia and just about anywhere else coffee is sold online.

Here at Coffeeness, we stumbled upon the topic back in 2019, and thoroughly investigated Roastmarket’s non-transparent handling of customer reviews. These findings were part of our German coffee marketplace review, which we published after the storm caused by the first article had died down a bit.

We have developed this new article with input from many of our colleagues in the coffee community. It was preceded by numerous discussions among roasting industry professionals on Facebook groups and on Twitter.

I wrote this article in collaboration with Pingo (Quijote Coffee), Benjamin (Kaffeemacher:innen) and Wolfram (Backyard Coffee). As industry experts and market observers, we all view recent marketplace developments with concern. 

We like to think this article presents a nuanced view of coffee marketplaces from the perspective of the specialty coffee industry. Above all, it’s intended as a conversation starter, and we therefore expressly invite comment and discussion.

‘There’s a Boom in Coffee Marketplaces Right Now.’

It seems the big players are afraid of missing out. Meanwhile, Tchibo, Melitta and Joh. Jacobs Co. have launched their own marketplaces.

It started with Roastmarket. Founded in 2015, the startup began as a coffee marketplace featuring equipment and coffees from various roasting companies. In addition to roasted coffee from well-known Italian brands, coffees from trendy small roasters were also added to the range. 

In 2019, a Melitta investment company joined Roastmarket. Then, in the summer of 2021, the Melitta Group became the majority shareholder with 72 percent, while BurdaVerlag acquired the remaining shares.

At the start of 2022, Tchibo followed suit with its roasted. platform. While Roastmarket placed independent specialty coffee roasters in the field of the big players, Tchibo is going one step further by making specialty coffee the focus. However, if you scroll through the site a bit, you’ll quickly stumble across the placements for mass-market brands like Caffe Pasucci.

The special thing about roasted. is that it is featured prominently on the German Tchibo website. So at Tchibo, there is now “boutique” coffee from Neues Schwarz, Giovanna and the VIER roastery.

Recently, Joh. Jacobs Co. apparently also jumped on the bandwagon with the 60beans marketplace. Although there are no explicit references to the connection on the website, Dr. Joh. Christian Jacobs, Dr. Conrad von Stechow and Jonathan Wehkingall show up in the fine print.

Intriguingly, since our exchange on Facebook, the Jacobs namehas disappeared altogether. Hands up who thinks this is an attempt to disguise who is behind 60beans! Anyway, you only need do a little research on Jonathan Wehking to quickly find the connection. Photos of Jonathan in the Jacobs bus and wearing a Jacobs apron are all over the Internet.

Again, the focus is supposedly on good coffee: “We are 60beans and we bring the best specialty coffee to your home.”

Our question: “As a quality coffee roaster, does it make sense to sell your product in a coffee marketplace?” 

Our answer is, “NO!”

Or, to put it another way:

The Sell-off of Small Roasters Has Begun

What arguments actually motivate small roasters to sell in marketplaces?

We asked and got these answers:

Let’s now continue with a systematic reality check.

What Is the Goal of Marketplaces?

The excellent phrase platform capitalism has been around for a few years now and sums it up nicely. After all, platforms are supposed to make money. Small roasters want that too, but it doesn’t stop there – the platforms want market power. Still, how do the players optimize revenue and gain control of the market?

It’s no coincidence that all the major platforms are controlled by powerful companies that have been in the coffee business for a long time. Let it roll off your tongue again: Joh. Jacobs Co., Tchibo and Melitta.

We believe that the final goal is to strengthen their own brands and ultimately sell more of their own coffee beans. And you can forget about the fact that “Specialty Coffee” is used in every other sentence and displayed in pretty fonts on their websites.

The use of “Specialty Coffee” is intentional, to attract – and lull into a false sense of security – as many small roasters as possible. Once the first prestigious names are on the hook, the Kissinger Effect occurs. This was the case with the Theranos company and its stellar reputation. Eventually, the company turned out to be a complete fraud. But among backers, a good name can quickly ensure that one’s own due diligence is neglected or even skipped completely.

A colleague wrote on Facebook that they feel like they’re “in good company” among the other participating roasters. The platforms advertise that they are gathering together the best roasters in the country. Who wouldn’t feel pumped up to be one of them?!

Still, once the marketplace is established, the company’s own brands – or the products of partners who bring the highest margins – are integrated and placed in such a way that they sell as well as possible.

Abuse of Power and Market Access

We always joke, “An online marketplace is only good if you own it.” But what’s the problem, really?

For the marketplace operators like Joh. Jacobs Co. and Tchibo, it does matter which coffee they sell. They prefer to sell whatever makes them the most money.

At the same time, they control the respective marketplace. “With great power comes great responsibility.” These are the words that Stan Lee, the Spider-Man author, gave to his hero. However, our keyword is not superheroes, but platform capitalism.

Marketplace operators control all reviews, every algorithm that sorts and displays products and all customer data. What Could Possibly Go Wrong?

For the marketplace operators, nothing. For the small roasters, everything. The Coffeeness post on Roastmarket’s opaque handling of customer reviews showed how quickly problems can arise.

Depending its level of success, a marketplace becomes a real gatekeeper. In a worst-case scenario, you can’t avoid the marketplace of you want to be visible online. The commitment of the large coffee companies, which has been strengthened by enormous capital investment, should also be seen in this light: as a battle for the control of market access.

Marketing in Coffee E-commerce

Coffee roasters are hoping for more reach, awareness and sales. But this is where a coffee marketplace can quickly become a trap.

The marketplaces are gaining control over business relationships with customers – and therefore over customer data. It isn’t possible, for example, to reach your customers directly via an email list and encourage them to resubscribe if necessary.

Thus, the coffee roaster gives up one of the most important tools in e-commerce: access to its own customer base.

During our discussions with roasters, we were often told that they hoped customers would get to know their brands and then subsequently order them in their own stores.

That’s not an impossible scenario, but in our opinion it’s extremely unlikely. Anyone who has ever dealt with lock-in effects should know this. The technical-functional customer lock-in alone is extremely relevant.

Personally, wherever I already have an account with my customer data entered is the place I’ll order from. At Coffeeness, for example, customers with an account purchase four times more coffee than those ordering as a guest.

Amazon is a prime example. And that pun was very much intended. Here you can also observe quite how frighteningly well the system works.

Rankings and SEO

Likewise, the hotel industry provides a good (and cautionary) example. Anyone searching for a particular hotel will almost always encounter large platforms, and rarely the hotel’s own website. It’s now getting to the point where many hotels can’t even be booked outside of a platform.

But is this terrible fate awaiting coffee roasters?

It has already begun. Anyone searching Google for participating roasters often finds one or more marketplaces first. There are many reasons for this. We could write an entire book about that. Let’s look at some examples now of how this comes about.

To sum it up:

Marketing and the Road to Dependency

At the Mercy of the platform

Market shares are accumulating and small business partners are becoming more and more codependent.

This is especially true for those business partners who have been on board for a long time. When things are going well, the platform’s bargaining position gets stronger and stronger. Eventually it gets to the point where the structures and investments built up in the roastery can only be maintained by the share of coffee traded through the marketplace.

How hard will it then be to turn down new, less favorable conditions?

Or it may be that – in one fell swoop – extra money has to be paid on the platforms to remain visible at all.

Once again, the platform acts as gatekeeper, is not subject to transparency regulations and follows the logic of its own capital interests.

Convincing Customers Through Quality

The hope of luring customers to one’s own website is made difficult by the lack of customer data and lock-in effects mentioned above.

In addition, there are the aforementioned evaluation regimes, which make big brands look better in many cases. And this is not only because it is in the interest of the marketplace, but also because of the specific target group of these markets.

Our guess is that these target customers place more emphasis on low prices than on quality. This fundamentally distinguishes them from customers who order directly from the roasters’ websites.

For example, there are plenty of decent cameras at Walmart, but a real photography enthusiast will certainly go to a specialized store.

Splashing Cash

If your name is Joh. Jacobs Co., Tchibo or Melitta and you establish a new marketplace, it doesn’t matter at first if it’s profitable. That’ll likely come later.

Initially, there’s a massive investment in growth. That’s why you’ll see ridiculously low shipping costs that don’t seem to make sense.

Free shipping for small amounts is, so to speak, a direct investment in the growth of the marketplace. It’s also meant as a good argument for no longer buying directly from the roasting companies. Because small companies calculate shipping costs with the intention of making at least a small profit.

In the real world that seems fair, and it’s why you have to pay for shipping.

The Buzzwordization

When it comes to topics like direct trade, transparency, sustainability, cooperation or simply specialty coffee, things can get uncomfortable. These terms aren’t just used for marketing; they are equally as much a part of our structures and beliefs.

The appropriation of these terms – already part of everyday life in the coffee market – is undermining them and transforming them into buzzwords.

Anyone who reads transparency travel reports or watches videos on a roaster’s website has the opportunity to quickly assess whether a company is just producing buzzwords or whether there is really something behind them. It’s easy to see which direction the website is heading in.

The marketplaces act as filters here. Both credible content and empty words are formatted in such a way that it’s no longer possible to distinguish differences between the two.

Criteria such as direct trade, transparent and sustainable are simply checked or omitted.

This makes it complicated for customers to figure out what’s really behind the offerings. And for the truly principled roasters, it becomes difficult to adequately tell their stories.

Giving Away Credibility

Without coffees from small, quality-focused roasters, an online marketplace is just a toothless tiger. But participation in these platforms unleashes a cycle.

Roasters who stand for value and quality in the industry (and beyond) sacrifice their credibility by teaming up with the platforms. In doing so, they legitimize the soft-pedaled use of terms like direct trade or sustainability.

They also open a doorway that serves as an excuse for other roasters not to take a close look themselves and ask questions. Instead, it becomes a case of, “If that roastery participates, then it will work for me”

And It Can Get Worse: Corporate-owned Brand

After a few years of activity, the Roastmarket platform is already steps ahead of its competitors. It has now “created” at least five of its own brands at once.

We have, for example, Schwarzmond, Wittmann and Baresi. Roastmarket has analyzed the preferences of various groups of its own customers for these fantasy brands, which it uses to imitate specific segments of the specialty market.

By all appearances, these roasters exist only on Roastmarket. Without in-depth industry knowledge and intensive research, these brands cannot be identified as Roastmarket’s corporate-owned products; instead they appear to be small, independent roasters. The placement of these products on the Roastmarket site is dominant. Offerings from authentic smaller roasters that aren’t part of the group generally fade into the background of the search hierarchy.

The worst assumption for a roastery participating in the Roastmarket – let’s call it Roast-X –  would therefore be this unfortunate sequence of events: 

The roaster advertises its products with the familiar “unique selling points”:

A regular customer is now searching online for Roast-X. She has already read many good things about this small roaster. During her search, she first lands on Roastmarket. That wasn’t her intention at all, but Roastmarket is simply better placed than the roastery itself.

Directly on the page, a comparison with – in Roastmarket ‘s estimation – similar products is displayed below each Roast-X coffee.

Not surprisingly, prominent references to Wittmann and Schwarzmond – Roastmarket’s own coffee brands – can also be found here. And of course, they’re priced lower than the Roast-X products. Plus, they’re accompanied by the identical catchphrases or “unique selling points.”

Admittedly, this is the worst possible scenario; one which heavily favors the platform. But it is absolutely not unrealistic, especially for the Roast-X roastery. Especially since Schwarzmond and Wittmann are not advertised anywhere except on Roastmarket. Turns out there’s a reason these brands exist.

Which Arguments Stand Up?

We believe that the penultimate argument from the list is a good one:

“Logistics is handled by the marketplace.”

True. They are also good at logistics. Dealing with logistics isn’t much fun, and it keeps many roasters not only tied up, but away from other, more important business.

People who are forever packaging orders don’t have much time to travel to growing regions or fine-tune new roasts.

But if logistics is your only problem, it’s also possible to work with a fulfillment service. These outfits also have their pros and cons, but they make their money from shipping and packing – not from selling their own coffee.

What To Do as a Roaster? Do It Yourself!

We’ve often heard, “I don’t know anything about marketing. How am I going to do it myself? Surely marketplaces are a great way to outsource that?”

We don’t think that’s quite true:

A very good resource to learn about blogging and SEO is Free Blogging Course: Learn How to Start and Grow a Blog for Your Business by ahrefs, one of the most reputable companies in the SEO field.

In our opinion, expertise within your own team is absolutely necessary. It’s better not to go through an agency. They are often not only outrageously expensive, but also usually ineffective and inefficient. It doesn’t matter for Joh. Jacobs Co., Tchibo and Melitta – they can just burn through a lot of money. However, an agency isn’t the right solution for you.

Incidentally, feel free to write to one of us. We know our way around by now, but we also taught ourselves everything. It’s not witchcraft, but it sure takes a lot of work.

We can’t offer consultation services, but we are happy to give tips for finding good and reputable sources or workshops.

Conclusion: Think Long-term and Consider Your Brand

A coffee marketplace sounds great at first, but in reality it’s a silly idea for roasters. We, too, discussed and considered the prospect.

The longer we talked about it, the clearer the picture became for us. Here again are the core arguments that speak for us not selling on a marketplace:

“It only makes sense to sell on a marketplace if the roastery has no ambitions of its own to sell coffee online or to be found on the Internet.”

How do you guys see this?

Have we got the wrong end of the stick or do you agree completely? We look forward to an open discussion in the comments section!