Starbucks needs to defeat Starbucks

Coffee
Photo owned by crschmidt (cc)

Starbucks is feeling the pain. Last night, the company reported a 97% drop in profits for the last quarter alone. The coffee giant reported net income of just $5.4 million or a cent a share in the quarter, shoddy performance when compared like-for-like with income of $158.8 million or 21 cents a share a year ago. Where the hell are they going wrong?

Starbucks have tried lots of things. Rapid expansion, selling music and expanding their menu repertoire into faffy Vivanno blended smoothies. All have failed to bear fruit. All are costing the bottom line.  The rapid expansion plan is costing them dearly. Despite the shitty income numbers, revenue was up a pinch, by $100 million. (And $100 million is a pinch when revenues stand at 2.5 billion for the quarter.) Restructuring, i.e. shutting down shop, ate up income. Yeah, it was Pacman.

One in a million

The biggest problem facing Starbucks is Starbucks. It’s just too damned successful. Traveling around the world, one is comforted by the siren in her familiar green livery. At the same time, the homogeny of the experience offered by franchisees is akin to McDonalds. It’s all a bit Fight Club. First rule of Starbucks, noone speaks of the flatpack experience of Starbucks. Second rule, go back and read the first. Don’t get me wrong, I love my warm Starbucks-cupped beverage like the next girl, it’s just that the outlet experience that leaves a lot to be desired.

Instead of each Starbucks having a spiritual twin half a hemisphere away, could national or even regional planners introduce local flavours? So, I’m in Starbucks somewhere in Barcelona, could I listen to some ad-hoc local musicians in an open-mic setup? How about Central London, could my Starbucks on Regent Street have dedicated shelves of poetry – perhaps ones I can browse and/or decide to buy? Or maybe the Starbucks in Piccadilly, mindful of the heavy footfall of tourists in the area could hold exhibitions of up and coming London artists with maybe the odd historical show now and then? What I’m hinting at is that large chains are winning on market breadth and scale for great value of produce, but have a way to go to add a twist of something local to their menu.

Small cafés should really be chomping at the bit for these distinguishing features. Nimbly set, they could adopt book shelves or evening comedy shows much faster than their conglomerate cousins. Wouldn’t you love that?

Plug Me In

Starbucks customers in the States can avail of up to two hours of wifi if they have a Starbucks card or are an AT&T customer. Not so in Ireland, where only some of the outlets have shabby Eircom nets of wifi. Want to make sure young customers steeped in coffee culture come in and stay at Starbucks? How about opening up those wifi nodes?

Yeah, it sounds like your customers are cheap. But are they really? Not when they are spend €4 or more on a single cup of coffee. Open up the wifi nodes. Make the dead air come alive and keep young customers wanting to have that extra cup of mud while they sift through their mailboxes.

Want another simple suggestion? How about integrated power points hidden away in every table?Childproofed, by default of course. Now, we’ve sorted out the wifi drought how about being generous with power?

Small cafés are already offering open wifi, so why is Starbucks being mean with theirs? The power point issue is a bear bug that every outlet offering free wifi ought to be addressing.

How about a café goes the extra step and starts a blog? There’s so much that can be done with a café blog – news, menu adds, recipes, pictures, stories, competitions, mail order sales of goods and memorabilia. And that’s just the beginning.

Free Topups of Filtered Blends

Average filtered coffee blends are far less expensive than their roasted, toasted and hugged bean cousins that are brewed individually for each customer. How about endless refills for customers that go the filtered route? American diners live by this. Bottomless coffee mugs rock.

Starbucks is not doing this, some independents few and far between are. This is coffee shop 101, right?

Pitch the price of filtered coffee at half that of your regular barista Americano, if possible. Of course, it all depends on raw materials.

Wow, more free filtered coffee? Hmm, maybe I’ll splash out on a sandwich or possibly a pastry. How about a slice of cake? There’s profit in pastries.

Local Living/Giving Tree

Charity begins at home. Why aren’t Starbucks or other chains partnering with community groups to help the aged, ill or needy in the locale? The idea of nurturing charity giving from a seed to a tree is not a new one.

A lot of customers would willingly pay 5 or 10 cents a cup extra, so that money could go directly to the local Hospice, Respite House or community club.

And chains could do matching gifts. For every €1 donated, they could match it and possibly spend the money on produce (like hampers or presents) they could source from suppliers. Saving on goods by using their scale as muscle. Double benefit for the charity or community organisation, right?

This idea may not add to the bottom line directly, but the idea of supporting local charities is a big PR win and could be something that customers use their judgement in choosing where they buy that cup of coffee on the run to work.

The Future is Cloudy, the Future is Change

Starbucks is facing massive challenges, whatever way it turns. It’ll be interesting to see how it tries to succeed against its greatest threat – itself. One thing is for certain, the tried and tested formula of expansion, expansion, expansion under a superflag of Starbucks homogeny is over. The changes, though painful, will have to come. Small cafés should be positioning themselves in local niches, before chains try to elbow in. It’s all about great food, good times and little local touches at the right price, isn’t it?

November 12th, 2008 at 10:23 am • Filed in Business



Comments

7 Comments to “Starbucks needs to defeat Starbucks”

  1. darragh Says:
    November 12th, 2008 at 12:34 pm

    Excellent suggestions Alexia! You’ll be glad to know though that we seem to be lucky in some Dublin outlets. The one on Harcourt street (my “local” and only one I spend any time beyond take away) has regular open mic friday afternoon sessions – “set you up for the weekend” and frequent collections for local charities – the last I saw was a book drive benefitting local schools. They also have a notice board for local events and charity projects their staff are involved in.

    I believe the one in Malahide has Pat Ingoldsby’s poetry as
    part of their design. It’s not much, true, and you highlight so many other ways to integrate but it’s a nice touch that I reckon comes more from the staff than on high.

    The wifi and power points though would be a massive who. The Blanch branch (one of 5 in the centre) offered to plug out a fridge to let me recharge…



  2. PaulSweeney Says:
    November 12th, 2008 at 1:25 pm

    Yeah. Great post. We don’t have Starbucks in Limerick. What you have to ask youself is, do I feel lucky? Well do you? punk? But seriously, have to agree with all your points. The current route is standard “Franchise Blueprint” thinking, and the world is more fluid now (I hope)



  3. Alex Bellinger Says:
    November 12th, 2008 at 1:27 pm

    Great post Alexia. What you say about wifi and integrated power points makes so much sense.

    If they implemented those features, they could easily become the hotdesk/office of choice for thousands of credit crunch conscious startups. But I guess they’re interested in turnover of covers to use a restaurant term.

    Still, I’d be happy to drink one coffee every half hour, if wifi was free. It’s a whole new serviced office concept ;)



  4. Annie Says:
    November 12th, 2008 at 2:30 pm

    Those ideas have so much potential. I really like the idea of making each Starbucks unique to it’s location and adding a more human touch. The nearest one to me is in Dundrum shopping centre and I have yet to darken it’s doors. Maybe they have tried things in there, but some how I’d imagine it’d be hard to ‘localise’ anything in that location.



  5. Phoebe Bright Says:
    November 12th, 2008 at 4:36 pm

    Yes Yes Yes to all your suggestions.



  6. Laura Daly Says:
    November 12th, 2008 at 5:08 pm

    Excellent post totally agree. Will post in the New Year on Manhattan Coffee shops for you and we can compare



  7. Joe Says:
    November 15th, 2008 at 12:27 am

    Ironically, McDonalds had such a bad image that it was losing market share to Starbucks etc until…they diversified and improved the quality of their menu and interiors. Have a read of http://url.ie/w9y

    For example, McDonalds in Germany offered McBier and ran a promotion where they sold a type of desert (Käse-Sahne-Dessert) which was part of a German-language comedy film.

    You can also get the Teriyaki-Burger in Japan, the McArabia in pitta bread in Cairo, Mango-Dressing in Sydney and even a McRice Burger…looks like a burger bun but I think it’s rice http://www.youtube.com/watch?v=-vJ0rZ-DK-Y



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