Undercover Economist

September 24, 2010 11:30 pm

How a nice cup of coffee worked wonders for a corner of Hackney

Successful businesses often operate in clusters. It may be a matter of tapping into local expertise or creating a destination for customers

When Venetia first tried to set up a café on Chatsworth Road in Hackney, east London, she encountered an unexpected obstacle: she couldn’t find a landlord who believed that she’d be good for her rent. The problem was that the kind of café Venetia imagined – one that served good pastries and excellent cappuccino – wasn’t the kind of café anyone had ever tried before on Chatsworth Road. The local property owners figured that if nobody had ever tried it, it probably wouldn’t work.

Once a sufficiently optimistic landlord had been located, Venetia’s Coffee Shop went through the usual growing pains of any small business: the trouble with staff; the groping towards a profitable mix of food and drink at a price that customers are willing to pay; the difficulty, in 2007 and 2008, of finding an accommodating bank. But the business has survived it all and appears to be around for the long haul, much to the delight of this particular columnist.

More

On this story

Undercover Economist

Earlier this month, a crêperie opened a couple of doors down from Venetia’s. It is the latest in a growing cluster of businesses catering to the area’s new middle class. There’s the fancy deli, displaying French cheeses and Spanish meats. The Chatsworth Kitchen offers home-style cooking for the crowd who might favour trendy London restaurants such as Moro or Ottolenghi. The toy shop sells mostly wooden toys, and there is also some kind of juice bar, which I view with scepticism but am told is excellent.

Five businesses have not turned Chatsworth Road into Knightsbridge, surrounded as they are by betting shops, pound stores and laundrettes. But it is interesting that the higher-end shops didn’t come sooner. Property prices had long since pushed Islington wannabes out to Stoke Newington and then to unfashionable corners of Hackney. The customers were there, but not the businesses to serve them. Given the restaurants, cafés and delis which line Stoke Newington Church Street a mile or so away, it might have seemed obvious that it was possible to run similar businesses on Chatsworth Road. But somebody had to demonstrate that it could be done.

Successful businesses often operate in clusters – whether the theatres of the West End and the jewellers of Hatton Garden in London, or the marine engineers of Cowes. Sometimes this is a matter of tapping into local expertise; at other times it’s all about creating a destination for customers. That is partly the lesson of the gentrification of Chatsworth Road.

But clusters are also about demonstrating that something can be done. Venetia proved to the local property owners that it might indeed be worth letting to a posh business they didn’t understand; she proved to the banks that such businesses could succeed, and she demonstrated to other entrepreneurs that success was possible.

Government plans often assume that business clusters can only be created by the designs of the planner. Free-market fans sometimes make the opposite error, and assume that if there’s a gap in the market, the gap will be filled, and quickly. Reality is more complicated. Venetia made a lot of things possible on Chatsworth Road.

We tend to think of innovators as people who create wondrous new technologies. But that word should also include people who see that a café works in Islington and wonder if it might work in an unfashionable corner of Hackney. Such people take great risks, but the rewards are shared with many other people. We are lucky that they exist.

Tim Harford’s latest book is ‘Dear Undercover Economist’ (Little, Brown)

What’s your view? To comment on this column please e-mail the FT Weekend Magazine at ftweekendmagazine@ft.com

Related Topics

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

LIFE AND ARTS ON TWITTER

More FT Twitter accounts