Starbucks Closings Raise Questions

Becky Carroll of Customer’s Rock! is my partner in the reExperience Starbucks project. Please check out her post: Starbucks and Store Closings: How will it affect the experience?

It’s not a big surprise that Starbucks announced this week that it would shutter 600 stores. Everyone knew there were too many Starbucks. What used to be a cool place to go hang out, had become a commodity. Towns and neighborhoods used to wait with anticipation: “When are we going to get a Starbucks?” Now it’s difficult to drive more than a few blocks with without seeing the green-circled sea siren.

Photo: Wikimedia

Howard Schultz released his first memo to partners in more than two months the past Tuesday. While shocking, the store closings were not surprising. A commodity is just not special. Commoditization is the real reason Starbucks had to close it’s stores, but it’s not the one Howard cited. Schultz chose to blame the economy:

“For more than a year now, we have seen the adverse impact that a slower economy and dramatic decline in consumer confidence have had on our U.S. business. This has resulted in a drop in comparable store sales due to a reduction in customer traffic. The pressure on store unit economics has required us to take a serious look at our store portfolio.”

In Howard’s first transformation agenda communication in January, he declared a primary objective of the transformation to be:

“Re-igniting our emotional attachment with our customers by restoring the connection our customers have with you, our coffee, our brand, and our stores. Unlike many other places that sell coffee, Starbucks built the equity of our brand through the Starbucks Experience. It comes to life every day in the relationship our people have with our customers. By focusing again on the Starbucks Experience, we will create a renewed level of meaningful differentiation and separation in the market between us and others who are attempting to sell coffee.”

Schultz has also made several statements about Starbucks reclaiming their famed “third place” status. The place you want to hang out other than home or work.

All this leads me to my first question: Are all these changes really about the Starbucks experience or are they about the Starbucks stock price? Financial analysts seem to like the lineup of new products to be rolled out this year. Domestic layoffs coupled with planned international expansion is sure to be a stock price booster. But what about a Starbucks experience booster?

I’ve raised the question before, is Starbucks going to become a beverage convenience store, or are they going to be the third place? They can’t be both. So far, the in-store changes we’ve seen have been about product-based differentiation. I have not seen any major movement in experience-based differentiation.

Cynicism is easy in a time like this. Starbucks and Schultz have an obligation to shareholders to revive the stock price, for that, they should not be faulted.

Did Starbucks become a darling American brand through commoditization and new product rollouts? No, Starbucks iconic status was a result of experience; they way they made us feel about drinking coffee. For a while they were our third place.

So the really big question: Is this all part of a master diabolical plan by Howard to revive the experience? Or are we just hoping that it is because we miss our old Starbucks?

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