600: This is capitalism! Starbucks ditches its weak
Recently a friend of mine was made manager of a struggling Starbucks cafe in southern California that opened in 2006.
Given that the corporation announced earlier this week that it is going to close 600 unprofitable stores you can probably guess the rest of the story.
Yes, my friend’s store is one of the 600.
For some pundits, Starbucks’s decision to not operate money-losing stores is a sort of religious experience, a joint punishment for the company and its customers who pay a sinful three or four dollars for a cup of coffee (never mind that a large cup of coffee generally costs less than two dollars at Starbucks, somehow the molten candybar/caffeinated milkshake concoctions that ring up for 3 bucks or more define coffee). The God of these pundits work in strange ways, tanking real estate markets and spiking gas prices to strike the hedonistic caffeine surplers.
The troubles facing Starbucks are mostly of the company’s own creation. The major one is good old-fashioned over expansion, as evidenced by the fact that 70% of the stores the company is to close were opened in 2006 or later. Part of the over-expansion was caused by buying into the promise of booming real estate markets and fast population growth in many regions across America. Not only did Starbucks put too many stores in densely populated areas, it also put stores in areas that had yet to become densely populated, as reported by the New York Times:
Another problem, according to analysts and brokers, was that many of the newer stores were in areas of potential but unrealized population growth. The housing crisis derailed much of that planned development, in many cases putting the company in the position of waiting for new traffic patterns that never materialized.
Another contributing factor was likely the company’s loss of in-store direction. It’s almost as if Starbucks executives grew bored running coffee houses in the late 1990′s. CEO Howard Schultz shocked analysts during the dotcom bubble by suggesting that the company was planning an ill-defined Internet venture. Later, the stores started selling music, movies and even breakfast sandwiches, all of which, I imagine, detracted from the core and essence of the Starbucks product. The proliferation of licensed stores – cafes that serve Starbucks coffee but aren’t actually Starbucks cafes – have probably also reduced the value of the company’s brand.
In suburban towns Starbucks cafes seem to function as social gathering places for all kinds of people – pupils, mothers, workers, professionals, seniors – and as long as that holds true the chain should have a decent shot at turning its fortunes around. The following snippet from the Hi-Desert Star in Yucca Valley in California makes the point:
Frequent drinkers Dulcie MacKay and Candy Jo Keserich, caught sipping their venti white-chocolate mochaccinos outside the Yucca Valley coffee bar Thursday, are hoping for the best.
“We meet all of our friends here. It’s like a family get-together,” said MacKay.
She and Keserich, who have been friends for 20 years, enjoy the mix of people percolating here — women who work at Stater Bros., nurses from the local hospital, sheriff’s detectives and handsome Marines in their uniforms and pet owners who sit and sip outside with their dogs.
“I hope this doesn’t close,” said Keserich. “We need this. Everyone is so nice here.”
The store they’re talking about pre-dates 2006 and isn’t likely to be shut down.
A Tom Mullaney writes in Chicago Tribune how the Starbucks experience was increasingly diluted by a steady stream of minor changes. He writes that the new look that the company is apparently gunning for suggests it time as a social gathering place is coming to an end:
The new look of its store at Jackson and Wabash and the one across from Fourth Presbyterian Church on Chestnut Street are a change for the worse. Gone are the comfy, oversize chairs and distinctive wooden tables.
In their place are stainless steel tables and chairs that look as though they came from Office Liquidators. They send a harsh message to customers: Get in, get out, don’t linger. And customers seem to be doing just that. Clusters of coffee drinkers in conversation are no more.
Boston Globe trivial-affairs columnist Alex Beam has a funny line in a piece on the rough waters Starbucks is finding itself in:
I hit Dunkin’ a few mornings each week after exercising. It’s the only time of day when I interact with men and women who actually work for a living.
Agonizing over store closings across the nation
Albert Lea in southern Minnesota is reportedly losing its Starbucks store The town has about 18,000 people. The store opened in 2004.
The store on Commerce Drive in Nortwest Rochester is going down, according to KAAL-ABC 6 in Rochester, Minensota.
The Owasso Reporter in Owasso, OK, wonders whether the town’s Starbucks store, which was opened late in 2006, will get the ax. The town also has a Starbucks-licensed cafe in a Target store. Owasso is a fast growing town with 25,000 people.
Vallejo Times-Herald speculates on the looming fate of area Starbucks cafes. Writes the newspaper’s Rachel Raskin-Zrihen:
The first Starbucks opened in Vallejo on Benicia Road in 2001, after several years of lobbying by residents, community analyst Annette Taylor said. The holdup was finding a suitable location, she said.
There are eight Starbucks stores in Velljo and another seven in nearby American Canyon and Benicia. Three of the 15, one in each town, meet the criteria for being shut down, according to an unidentified store manager interviewed by the Times-Herald. The newspaper also interviews a customer who dares to go against the stream of gleeful Starbucks denouncers:
The prospect of Starbucks closing makes regular customer Karla Saldivar of Vallejo nervous. There can never be too many Starbucks, said Saldivar, who frequents many Starbucks in town.
“Starbucks is always full, so if there are fewer of them, they could be even more full,” Saldivar said. “And sometimes we’re in a hurry. It could make me stop coming to Starbucks.”
Starbucks on Watt Street in Schenectady will be closed, according to WGRB-CBS 6 in Albany, New York.
Residents in West Palm Beach appear to fully expect Starbucks to prune the number of stores in their town, mostly because Palm Beach County has more than 60 stores, according to Palm Beach Post.
July 12th update: Starbucks has posted a list with the first 50 stores to bite the dust.
