By Chris O’Brien
According to Bloomberg.com, Starbucks will close 600 stores within the next nine months and eliminate 12,000 jobs. For some perspective, that’s about 7% of its global workforce. At the end of March 2008, the company boasted 16,226 stores -just over halfway to CEO Howard Schultz’ stated goal of 30,000 outlets.
The company says most of the stores slated for shuddering are near other Starbucks locations. So, maybe opening two or three Starbucks on a block isn’t such a great business plan after all? Or is it actually a very sly strategy designed to bully smaller competitors out of business?
Starbucks Chief Financial Officer Peter Bocian admits that the stores targeted for closure were cannibalizing 25-30% of the sales of other nearby locations. But here’s the kicker. Starbucks stocks rose 4.5% immediately after the announcement.
Follow the logic here. Starbucks opens stores that it can’t afford and then closes them and gets a boost on Wall Street. Meanwhile, local competitors are put out of business while Starbucks carries the unprofitable stores. Once competitors are closed, Starbucks closes its redundant stores. That leaves the other one or two nearby Starbucks perfectly positioned to not just regain the customers from the other Starbucks but also to gain all the customers from the closed down competitor.
Maybe I’m just paranoid. Or maybe a company aiming for 30,000 stores is a beast that someone needs to slay.
July 2, 2008 at 2:30 pm |
I think that is an adequate and fair synopsis. Some of us Students for Fair Trade were discussing the issue of Starbucks running independent coffee shops out of business the other day. The one thing I can add was that about 4-5 years ago, right before I started grad school the Wall Street Journal ran a story about how Starbucks opening stores right near (and in one case next door) to independent coffee stores actually increased sales at independent coffee shops. I don’t believe it was actually an academic peer reviewed study just a report from the WSL journalist.
One thing is pretty much a given though, Starbucks got the American consumer used to paying more for coffee and most if not all of their coffee is gourmet (not saying it tastes good) so I’m pretty sure they can take credit for getting Americans to get a palate for gourmet coffee. After the consumer acquires a taste for good coffee they can then consume responsibly by buying fair trade organic and supporting local independent businesses.
July 3, 2008 at 7:13 pm |
For anybody who likes bottled coffee drinks, a fair trade (and organic) alternative to Starbucks is the coffees by Adina. They are certified by TransFair, and you can actually pronounce all the label ingredients (as opposed to Starbucks’ scary contents). I especially like the Vanilla Latte (Guatamalan beans) and Ethiopian Espresso (Harrar beans).
May 5, 2009 at 2:28 pm |
I have a serious problem. I am addictied to starbucks coffee, and I don’t care!!!!!!!!11