Tuesday, November 4, 2008

Starbucks: The world's local coffee house

The best connections are the ones that take you to new and strange places. Slate writer, Daniel Gross, certainly ventured off the map when he connected the number of Starbucks locations in a country’s financial capital with how affected the city has been by the recent economic blast. The more Starbucks stores, the worse affected. So, London has lots of stores (256), lots of problems. It’s a snappy tie-up and underneath it there is probably something to be learnt.

I love Starbucks and no one has been smarter than Starbucks at understanding the business they were in. In Starbucks’ case, it wasn’t the coffee business or the fast food business (or the music or book businesses!) but the connections business. The introduction of the Third Place into millions of busy lives was a brilliant insight. Whenever I visit Starbucks HQ in Seattle and talk with them, I am always impressed by how they have touched so much of their business with Mystery, Sensuality and Intimacy. So why have they been struggling in recent years when they’ve got so much right? I think what happened is they grew explosively and began to drift. They drifted into the property business. They had so many stores in so many prime locations (with some of that value generated by Starbucks moving into the neighborhood) that the coffee struggled to be at the center.

Geoff Vuleta, a Saatchi & Saatchi alumnus and now CEO of innovation shop Fahrenheit 212, used the property business insight to come up with startling foresight for Starbucks. His thought? Get out of the property business. Refocus on being the coffee authority by shrinking the store size. People associate the Third Place with what Starbucks has to offer, but that doesn’t mean Starbucks has to deliver on it in some of the most expensive real estate on the planet. Make the outlets smaller and concentrate on serving really good coffee, go back to being the world's local coffee house, back to being a friend. Starbucks might end up with the same number of stores in London, for example, but each would be more focused, more agile and more valuable. Even Daniel Gross would approve.

1 comment:

Robin Capper said...

I read a similar but slightly different take on the whole coffee/crash thing from Jeremy Clarkson in The Times. He thought the consumption of good coffee indicated survival. Means if, like me, you think Starbucks ain't great coffee both posts agree!