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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i most definitely believe that all these store closures are due to the fact that many cities and communities are oversaturated with starbucks locations -- many of these being located across the street from one another. with the market and economy being the way it is (and seemingly continuing the way it is) it makes sense to be closing stores that are across the street from one another. i also think that this attributes the 97 percent profit loss that starbucks has seen in their last quarter (if only because closing stores obviously leads to profit drops).

As far as what this means for coffeeshops across the board... i'd say that there are going to be drops in sales and profits and everyone is going to feel it -- not because of what's happening at starbucks, but more because of what's happening to the economy. people are cutting down on their disposable incomes and reallocating the money that they would use on coffee, merchandise, clothing and other goods to pay for other things. so i think alot of shops are going to be feeling the hurt in one way or another, whether it is in the form of lower sales, a decrease in weekly sales, fewer orders, and overall less business.

all i can say is that it sucks. hopefully this economic crisis will blow over...even if takes a year or five.
The Wall St. Journal this morning (1/15/09) has an article on the boom in home espresso equipment. Sales are seriously increasing. Manufacturers, department stores and gourmet kitchenware stores are pushing it as a money-saving alternative to the "Starbucks latte."

Coffee shop owners and baristas should be thinking about how to serve this market. A barista with a friendly personality, who can talk knowledgeably about his/her shop's bagged coffees will have a valuable edge in this economy.
Interesting Marshall ... do you have a link?

Marshall Fuss said:
The Wall St. Journal this morning (1/15/09) has an article on the boom in home espresso equipment. Sales are seriously increasing. Manufacturers, department stores and gourmet kitchenware stores are pushing it as a money-saving alternative to the "Starbucks latte."

Coffee shop owners and baristas should be thinking about how to serve this market. A barista with a friendly personality, who can talk knowledgeably about his/her shop's bagged coffees will have a valuable edge in this economy.
We have noticed a slight uptick in espresso bean and syrup bottle sales. What about holding little "how to use your home espresso machine" clinics at your shop?
I run cupping sessions for interested retail people from time to time and we always end up pulling shots and getting into espresso as the "dessert" part of the session. I'm interested to see how many of those that may be down with buying a machine get into the more capable home units because they usually run at $1000 or better. Up to this point, when you get someone so geeked about espresso that they want to do it at home, they invariably wind up coming back to you because they could only afford a not-so capable machine leaving them unsatisfied with what they are able to make on it. Kind of a catch 22 financially these days either way for someone that cost wary.
Matt Milletto said:
Interesting Marshall ... do you have a link?
The article is "Coffee Steeps in Value Marketing: Even Pricey Espresso Makers Are Touted as Cheap Starbucks Alternatives." For the faint of heart, beware: superautos and pod machines are discussed. Here is the link for online readers, but it may require a subscription: http://online.wsj.com/article/SB123199028936584753.html?mod=todays_...
Marshall Fuss said:
Matt Milletto said:
Interesting Marshall ... do you have a link?
The article is "Coffee Steeps in Value Marketing: Even Pricey Espresso Makers Are Touted as Cheap Starbucks Alternatives." For the faint of heart, beware: superautos and pod machines are discussed. Here is the link for online readers, but it may require a subscription: http://online.wsj.com/article/SB123199028936584753.html?mod=todays_...

You know, I never noticed until just now how much that sounds like a horror film... Invasion of the Pod machines. But I digress... Thanks for the link.
Brady said:
You know, I never noticed until just now how much that sounds like a horror film... Invasion of the Pod machines. But I digress... Thanks for the link.
Of course, it's not really a joke. Some customers are probably deciding right now whether and how often to trade a visit to your shop for a pod. Each shop will have to decide how much of a challenge this is and what their response should be. A pro-active "I notice we haven't been seeing as much of you as we used to. Why don't you try a bag of our Acme Morning Blend at home?" might make sense.
The most important lesson here is Starbucks recognized the state of the economy and took action. They also recognize that it is about quality and that is also what the next couple years focus will be for them.
After I got canned from Starbucks, ( no not because I competed, I'm not that rebellious and they aren't that mean) I went back and worked at my old store 121 as a Barista 20 hours a week for 8 bucks an hour just because I knew it was one of the 600. In a way it was research and in another a way for me to say goodbye the way I wanted to Respectfully.

Another Lesson here is what the consumer of the 600 stores reactions were. Every morning we got " Have you heard what starbucks your going to?" I was leaving so I politely said so and turned the question around. "What Starbucks will you be visiting every morning?" Because in Dallas, thats what is important. Which one the one half a mile away or the one 2 miles away. They were deeply hurt by the closures and surprisingly I've had a few of my starbucks regulars come to see me a couple times a week at my new place of employment.

There is lots to think about here... and to learn from.
Marshall Fuss said:
Brady said:
You know, I never noticed until just now how much that sounds like a horror film... Invasion of the Pod machines. But I digress... Thanks for the link.
Of course, it's not really a joke. Some customers are probably deciding right now whether and how often to trade a visit to your shop for a pod. Each shop will have to decide how much of a challenge this is and what their response should be. A pro-active "I notice we haven't been seeing as much of you as we used to. Why don't you try a bag of our Acme Morning Blend at home?" might make sense.

It really isn't. This was part of the reason I suggested the "how-to". The potential enthusiasts that I've invited behind the bar for a quick demo seem to become better customers. What better way for them to develop a better appreciation for the skill, knowledge, ingredients, and sheer time behind a bar that we've accumulated than to really show them what all that noise behind the bar is about?

Of course, I do stress the importance of freshly ground coffee, good shots, and good milk to making a good drink, and try to nicely let them know that their machine is probably not going to be capable of producing the kind of crema or texture of milk that I get with our commercial machine and grinder. This is mostly so they have a realistic expectation of what they can do on a pod or a $100 Braun and don't beat themselves up when their results don't match mine.

That said, I am really trying to take a long view of this situation. If we can establish ourselves as THE friendly neighborhood coffee gurus, then we will be the place they come to for advice and beans, drinks when they are treating themselves, frequent once things start to turn around, or come looking for a job if they decide they really do love making coffee.
Maybe this should be in a different thread, but do the popular POS systems allow shops to track changes in individual customers' habits by tracking credit cart i.d?
This weekend I was at the Sur le Table in the Ferry Building in San Francisco. I noticed their home espresso displays were about 4:1 pod machines. I asked a salesperson if that reflected their sales ratio. He said "not yet," but that HQ was pushing pod machines and wanted lots of them on display.

Today (1/21/09) Ken Davids published a review of pods, including one from L.A. artisan roaster, Supreme Bean. He gave some of the pods pretty high marks (but not for being environmentally friendly): http://www.coffeereview.com/article.cfm?ID=152

Definitely something to keep an eye on here.

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