Independents and Consumer Reactions to Starbucks Closing Stores

I have been talking to a lot of people looking to open a coffee business, or are existing retailers already about the announcement that Starbucks will be closing roughly 600 stores. There has been some mixed thoughts, concerns and feelings about how this will ultimately effect the independent retailer. (I would love to hear from some of you who are in the industry as well).

I think it is important to remember that Starbucks WAS the neighborhood coffee bar when they emerged on the scene. With their growth plan, and focus on tapping new markets and market saturation, what has happened is that the independents have come in and done it better. The care for the customer, serving quality beverages, knowing who your customers are and supporting a more local atmosphere, are all aspects that the indy coffee bar thrives in, and we have seen in the past few months, Starbucks interest in moving back towards this model.

They over saturated to the point that they were often competing with themselves, paying for two locations and maybe splitting profits/customers. It seems that to sustain their new changes, that closing some stores would be inevitable.

I don't see this as being a bad thing for the independent retailer, but it is a confirmation that coffee retail has evolved to the point that it is imperative to offer a high quality product, and that demographics are very different from city to city, and a boiler plate, corporate coffee bar is not always what consumers want. As the economy moves towards a much more local focused, sustainable business model, I think the independent coffee bar/roaster can very much succeed.

Here is a link to an article on Reuters that has some interesting comments ...

"Starbucks was a cool brand, and then all of a sudden it's not a cool brand," he said. "There's this new global consciousness that is out there that can suddenly shift."

Anyway, I thought this would make a good topic for discussion as we have such a wide variety of coffee professionals, consumers and retailers on the site.

- Matt

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Retailers: If a Starbucks near your shop has closed down, it's a great time to accept exchanges of Starbucks cards for your own pre-loaded gift & loyalty cards.
A neat idea... (and one I've considered) but then what do you do with the card? Any clever ideas for how to make the money side work?
Brady said:
A neat idea... (and one I've considered) but then what do you do with the card? Any clever ideas for how to make the money side work?

Well, there's the onion. I do have some clever ideas, and they're going to appear in an upcoming Graham's Gazette. :)
I think the fact they are now closing 61 (or 2/3rds) of the stores in Australia at very short notice is very telling. I guess in Australia the brand has somewhat struggled against some fairly well founded independent and home grown brands that have been around a long time. However, I am quite suprised that despite the competetion, the company has decided to really cut back presence in a Market that is coffee savy and an economy that is still doing pretty well in comparision with the US. It would be interesting to hear comments from some of the Aussie Bx'ers

SYDNEY (AFP) — US coffee chain Starbucks announced plans Tuesday to close 61 of its 84 stores in Australia within a week.

The company said on its Australian website that it was undergoing a "geographical refocus" so it could concentrate on the major cities of Sydney, Melbourne and Brisbane.

"This decision will result in the closure of 61 locations throughout the country by August 3," it said.

The move comes after Starbucks in the United States announced earlier this month that it was closing 600 stores.
This kind of explains some of it, but for us small family, or single owner coffee house owners we really are a hood centric coffee house. A 3rd place, that are not concerned with your status in the work force, but are interested in you as being a wonderful person.

Read On

Best
Brian

The price of the company's stock has been cut in half – and then some.
Fewer people come through store doors and those who do buy less.

Still when Starbucks, that longtime engine of growth, announced that it
planned to close 600 US stores – 50 of them by the end of July – and lay
off 12,000 employees, company watchers reacted with surprise. One
journalist called it the "sudden shocking end to the long and gilded age
of Starbucks."

As the shock wore off, the explanations came. Pundits and analysts blamed
stock prices, the mortgage crisis, competition from McDonald's and Dunkin
Donuts, along with real estate blunders, like putting stores on opposite
corners of the same intersection. But they had it mostly wrong. This
economic logic was too narrow and not culturally informed enough to
explain Starbucks' fall.

The company thrived throughout the past 15 years by giving middle-class
Americans exactly what they thought they wanted – and this wasn't really
about coffee. It was about creating a product that allowed doctors and
lawyers, IT specialists and travel writers, and then their imitators, to
portray themselves as they wanted to be seen. That's how products work in
the world we live in. We buy things to announce something about ourselves.

For the most part, the products that sell the best are the ones that
communicate most effectively. That's what Starbucks did with their coffee.

Really, then, they sold not coffee but elevated status. Just by buying the
coffee and speaking the company's made-up lingua franca, you became a
cup-carrying member of the upper class. And that made Starbucks,
overpriced as it was, an affordable form of statusmaking.

It was, after all, cheaper than a BMW, a Kate Spade bag, an Armani suit,
or a Colorado ski vacation, but it projected "upscale" in the same way.
That's why it was valuable, maybe even a bargain at $4 a cup.

I once asked a woman who graduated from community college and worked as a
dental hygienist why she went to Starbucks several times a week; she
answered, "I don't really like the coffee, but I go because successful
people go there and I hope it rubs off on me."

This was not a phenomenon unique to the United States. I once talked with
a 30-something man who was sipping a grande iced coffee in Singapore. Why
do you like Starbucks, I asked him. Why don't you go to a local cafe where
the coffee costs a quarter as much? "It is cool," he responded; "I'm cool
when I'm drinking it."

That sense of success – that sense of cool – is what is gone now.

It is gone because Starbucks violated the economic principles of cultural
scarcity. Once something becomes too common, it can't keep generating cool
or envy or status.

Now that there are Starbucks stores everywhere, in Tokyo and Terre Haute,
London, and Lancaster (Pa. and Calif.), and Franklin, Tenn., and Franklin,
Ind., it is too ordinary. Once the soundtrack promoted in stores changed
from Miles Davis and Buena Vista Social Club to Kenny G. and Paul
McCartney, it seemed too commonplace. When cappuccinos turned into
Frappuccinos – a trademarked phrase by the way – the brand didn't seem as
sophisticated. And now that Cosi and Panera – not to mention some airport
lounges – look like Starbucks, it just doesn't look so special anymore
either.

Even the company's much touted bluish values of doing good seemed to get
scarcer, or at least spread thinner. Over the last year, Ethiopian
officials accused Starbucks of something close to coffee colonialism;
judges charged the company with unfair labor practices and putting its
hand in tip jars; and environmentalists wondered loudly how green the firm
could be when it used all of those throw-away paper and plastic cups.

Now Starbucks is just a coffee (and frothy milk and sugar) seller. In many
ways, the company has no one to blame but itself. It wanted to grow and
grow and force itself into the mainstream.

It succeeded. But that was the tipping point. At its height, consumers
could no longer distinguish themselves from one another anymore. And the
white cup with the green logo was emptied of cultural capital – long
before gas prices pushed past $4 or even $3 a gallon.

For Starbucks to make a comeback, it will somehow have to capture that
mojo again. And if it does, it won't matter how much a barrel of oil costs
or what McDonald's is selling. Status seekers will come back only when
Starbucks is a little scarcer and thus a little cooler.

• Bryant Simon, a professor of history and director of American studies at
Temple University, is completing work on his latest book, "Everything but
the Coffee: Learning About America From Starbucks."
To be honest with you, I see Starbuck's as something many of us (but not all) were trying to be 10 years ago, often when just starting out. It seemed that they really had the right idea. However, I now view starbuck's as a company without a vision of the future. Let me ask you... how many vanilla lattes can a consumer drink before they get sick of vanilla? Do they switch to caramel? What about when they get sick of that? How many times will they switch flavors before they start to wonder about the coffee itself? In the United States, I believe that there are a whole host of customers that want to break out of this "flavored latte" mold. How can you succeed if you use the same blend of coffee for 90% of your drinks, day after day, week after week, year after year? I like to think that in many ways, Americans are looking to finally embrace the different nuances that all the individual coffees in the world can offer. Much like the artisan wine and beer explosions of the last few decades, I feel that single farm coffees, single origin espressos, and simple, non-proprietary blends will be embraced by the public (at least, a significant part of it) in the near future. And I think that Starbucks is ill-prepared to meet this demand. Of course, that being said, I am a little drunk this evening. :)
That the bulbous mermaid would want to shed a few pounds should come as no surprise to anyone. They consumed their early competition without giving much thought to the food chain of our industry; and now the ecology of our industry has evolved; and Starbucks is the lumbering dinosaur surrounded by a host of more adept mammals.
I think the major factors are a combination of everything previously listed. Very rarely do companies fail for just a single reason. To me, one thing they've seemed to have forgotten is to learn from their past. Not just from the mistakes, but the good things. The article posted above by Tougo Coffee basically said they've lost that elitist/sheik factor. One of the many concepts of marketing is that you're not so much selling a product/brand based on the qualities it possess (which, to me, should be a major selling point) ...but that you're selling certain emotions/desires tied to those products/brands. Look at Nike in selling their sports apparel. Their commercials basically say "buy our product and you'll be the best athlete in the world". It's that idea that you will be better than the rest by using their products that Nike is trying to sell. Now...Nike does have a quality product (most of the time) to be able to justify charging $150+ for a pair of shoes. Once you get those two things in your clients/consumer's head, it's going to a lot for them to get it out. In Starbucks case, I think they've opened up to many stores (causing them to lose the elitist/sheik factor) and made their relatively inexpensive products readily available to the masses. By making their products readily available to everyone, they're quality has suffered greatly. I've been to Starbucks in Washington state (where I live), Oregon, New Mexico, Florida, Boston, London, Edinburgh, Germany, and Spain. Guess what...the same drink tastes different place to place (the only exception is the WA and OR comparison). There appears to be no quality control on a global level. But, at the same time, this could also be because of the different areas want different flavors and textures to come through in their drink. So who knows.

A lot of scrutinizing has been done, and even more will be done, about this. A lot of the reason can be attributed to other reasons/things. Some stuff we may never know. I personally can not stand them for various reason and I'm actually glad to see they're using a little bit of wisdom in a decision. Just because you can do something (ie, open another store), doesn't necessarily mean you should.

I would like to add...with all those places going out, that creates the potential for a lot of decent (if not great) properties opening up. Depending on your area...might be worth your time to look into if you're just starting.
Starbucks Coffee Company gave me my coffeeshop management training. I was an ASM for 2 years and developed MANY successful business plans that increased quarter after quarter of sales. After seeing the corporate politics that eventually drove me to quit a few months before my promotion, it doesn't surprise me a bit that the company as a whole is regressing. No one cared about the people when you get to the level of DMs and RMs and anything above GM positions- Howard Shultz has even become cold and hard towards partners. Firing those who are ill-informed of the romantic coffeehouse success formula has become a way of corporate coffee in America. They're not performing well? FIRE THEM. Eventually, no one cared. Just let the drinks suck. DMs never come in anymore, no one really cares about my performance or career growth- they just want me in uniform and to make more money for their #3344646 store out of the district. THAT is what my manager cares about. NUMBERS.

This formula can work for many businesses in America, but not coffeeshops. It's all about intimacy between the barista, the customer, and the cup. The bean is the heart of the romance- and the manager is the head of this household. They are to MANAGE this process, not become a corporate tyrant that rapes any genuine concern for humanity out of the store.

I had a alot of experience with Starbucks Corporation and witnessed horrifying management tactics in 6 stores in Alabama, tactics from upper and lower managements. Will this affect independant shops? Of course. Of course for the better. Starbucks is shutting itself down with a lack of heart for the people and product- the very foundation of what made it so successful in the beginning. We as independent baristas, a loosely united mafia of love and coffee beans, will continue to carry that out for them and learn from these lessons. Love is the key to make your business grow. Keep standards and keep numbers, keep procedures, but once love is gone, so will your customers be.
Not too difficult to see the err in logic when you open a new Starbucks inside the Starbucks kittycorner from the other Starbucks located a block away from the Safeway with a Starbucks in it.

I remember several years back hearing a press release announcing their intention to open x amount of stores a year (at the time it seemed like a billion per) both domestically and globally. Of course, this was for the benefit of the stockholders, not the coffee enthusiast. My thought at the time was "what is sustainable about that?" before anybody really started thinking about sustainability. It just seemed silly. I guess they found the limit.
I wish they would close some stores in Tucson but no there building more. And they brought back the sandwiches they got rid of because they wanted to focus more on coffee......please
I love The Bucks.. worked there for many years. However, I do admit that the job is idiot proof ( push button espresso shots and automatic steam wands ).

Starbucks is a beacon of the America Capitalistic Coffee Industry and has done a damn good job.

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