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How a coffee shop owner faced down Starbucks

Small Business Spotlight: REX Coffee
Small Business Spotlight: REX Coffee relies on return customers to stand out 04:01

Peter Crippen's little coffee shop on Manhattan's west side was thriving — then the proverbial 800-pound gorilla moved in on his street corner.

"I saw 10% of my afternoon sales disappear, just like that," Crippen told CBSN while reflecting on Starbucks opening a store up the street from his Rex Coffee. "That 10%, for a small business, is crazy important."

It's a familiar tale for small businesses. They face the usual challenge not only of getting customers in the door but also of fending off competition from much larger, better capitalized competitors.

Crippen's answer: Give the people what they want. Rex Coffee started offering breakfast sandwiches every day of the week, and customers noticed. The shop immediately recouped the sales it was losing to Starbucks. 

"When we started doing that, we immediately took that 10%, turned it into 15% on the morning and slowly built up the afternoon," he said. 

"Coming into your house"

But while Rex's popularity in part reflects its top-notch java, fresh food and tastefully stripped-down decor, the secret ingredient is customer service, Crippen said. He treats Rex — named after his son — like his home and customers like friends and family. 

"When someone walks in that door, they are coming into your house. Eighty percent of our customers every day are repeat customers, and the friendships that are created between the staff and the customers — it kind of blows my mind sometimes," he said. 

Friendships that nationwide chains, with their high rate of employee turnover and impersonal customer service, aren't exactly known for. In some ways, meanwhile, competition from Starbucks was just what Crippen needed to turn over every coffee pot in search of ways to improve his business. 

"It's the big guys — the other coffee shops that make you really think, 'Alright, what can we do better? How can we improve this, what can we offer everybody that they're not getting at Starbucks or somewhere else?' " Crippen said. 

He's made missteps, including opening a second location, which he closed after one year. But he now views that setback as a "the greatest learning experience I can imagine."

"I got an MBA out of it," he joked. 

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