Roaste.com: A coffee distribution network for the new millenium

Roaste.com (pronounced ROAST-ee) is a specialty marketplace that has some 2,200 coffees from more than 100 vendors and expects an additional 150 roasters by year-end. Three-year-old Roaste, which relaunched with an expanded site recently, has more than 10,000 customers. Founders Scott Lush, 43, and Eyal Rosen, 40, say the site creates a sense of community for users can now write reviews and gossip with fellow coffee lovers on blogs; one contributor praises an espresso blend for its buttery mouthfeel, while another sounds off on an Ethiopian organic for its unpleasant smoky bergamot flavor. Lush and Rosen, who discovered a shared love of coffee while working at Alcatel-Lucent (ALU) eight years ago, started the company in their Boston homes. They expect to triple revenue, to $3 million, next year.

Chazzano is a small roaster based in Ferndale, MI that roasts exotic varietals. For small specialty coffee vendors like Chazzano, who want to expand beyond their local market, roaste.com offers a unique opportunity. After gaining popularity in their local market, Chazzano is looking to grow. Partnering with roaste.com offers Chazzano an opportunity to have a national presence and grow its market without diminishing the time the small company has for roasting exotic varietals. For its services, Roaste keeps up to half the retail price of coffee sold on the site, roasters say. When an order comes in, Roaste sends the vendor an e-mail with the customers address. Most then roast the beans within hours and drop the package in the mail the same day. They get prepaid postage labels from Roaste, which also handles returns. Its very convenient for melike, brainless, says Tracy Swanson, who oversees marketing for Avion Coffee in Hayden, Idaho. Swanson is using Roaste to expand her $200,000 wholesale business into online retail and says her sales on the site have doubled annually since she signed up in 2008.

This description is excerpted from Bloomberg Businessweek.

Questions

Consider the distribution network for coffee described in this passage.

1. What type of a distribution network does Roastee employ?
2. Where is the inventory held in the network? What can you say about the inventory costs?
3. Comment on the impact of the distribution network on customer experience.
4. What impact does the network structure have on transportation cost? How does it compare with the transportation cost of a retailer like Starbucks that sends truckload shipments of coffee beans to its stores?

Is there a good fit between customer needs and the distribution network? If so, why? If not, suggest opportunities for fit improvement.