Is Starbucks’ stuck in the middle?

Thoughts after tag surfing….  A lot of the comments on the Starbucks store closings claim that the 600 closings are driven by location mistakes.  The recent internal memo from Howard Schultz listing the stores to close in July 2008 headlined the “poor real estate decisions” made (story here).  There has been a lot of talk of cannibalization (here) also.  I’ve seen estimates of 20-30 percent long-term sales declines when new stores open (sorry, but I can’t find the link).

I don’t buy that store location screw-ups are the central story. Less than two years ago Starbucks claimed that this wasn’t an issue at all (story here).  In my experience with McDonald’s, as along as we had our operations act together — which MCD had lost for a while and re-gained recently — the store “in fill” strategy worked and cannibalization wasn’t long-term. 

My take is that Starbucks just isn’t all that in any way any more: the coffee is good, but not great; the service is surly and slow, not showy and speedy.  Dunkin and McDonald’s do it cheaper and local shops do it better.  John Quelch puts the Starbucks dilemna succinctly here (actually it is a nice little piece):

Starbucks is a mass brand attempting to command a premium price for an experience that is no longer special. Either you have to cut price (and that implies a commensurate cut in the cost structure) or you have to cut distribution to restore the exclusivity of the brand.

IMHO, the store building spree itself simply sped up the public’s realization that not only had their old Starbucks lost it, but that all Starbucks had lost “it”. 

Hat tip: Christian Mullins at CU Potential (here)

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