Independents and Consumer Reactions to Starbucks Closing Stores

[Matt Milletto]

I have been talking to a lot of people looking to open a coffee business, or are existing retailers already about the announcement that Starbucks will be closing roughly 600 stores. There has been some mixed thoughts, concerns and feelings about how this will ultimately effect the independent retailer. (I would love to hear from some of you who are in the industry as well).

I think it is important to remember that Starbucks WAS the neighborhood coffee bar when they emerged on the scene. With their growth plan, and focus on tapping new markets and market saturation, what has happened is that the independents have come in and done it better. The care for the customer, serving quality beverages, knowing who your customers are and supporting a more local atmosphere, are all aspects that the indy coffee bar thrives in, and we have seen in the past few months, Starbucks interest in moving back towards this model.

They over saturated to the point that they were often competing with themselves, paying for two locations and maybe splitting profits/customers. It seems that to sustain their new changes, that closing some stores would be inevitable.

I don't see this as being a bad thing for the independent retailer, but it is a confirmation that coffee retail has evolved to the point that it is imperative to offer a high quality product, and that demographics are very different from city to city, and a boiler plate, corporate coffee bar is not always what consumers want. As the economy moves towards a much more local focused, sustainable business model, I think the independent coffee bar/roaster can very much succeed.

Here is a link to an article on Reuters that has some interesting comments ...

"Starbucks was a cool brand, and then all of a sudden it's not a cool brand," he said. "There's this new global consciousness that is out there that can suddenly shift."

Anyway, I thought this would make a good topic for discussion as we have such a wide variety of coffee professionals, consumers and retailers on the site.

- Matt

[Marshall Fuss]

This weekend I was at the Sur le Table in the Ferry Building in San Francisco. I noticed their home espresso displays were about 4:1 pod machines. I asked a salesperson if that reflected their sales ratio. He said "not yet," but that HQ was pushing pod machines and wanted lots of them on display.

Today (1/21/09) Ken Davids published a review of pods, including one from L.A. artisan roaster, Supreme Bean. He gave some of the pods pretty high marks (but not for being environmentally friendly): http://www.coffeereview.com/article.cfm?ID=152

Definitely something to keep an eye on here.

[Kurt Stauffer]

This is NOT good news for local independents. This is a sign of tough times that we are only on the doorstep of. I would not read this as somehow a victory or any such nonsense. People are not spending money on luxury items, even if they are considered a "small indulgence". I think there is more pain to come. In economic and investing circles there is something called "the myth of decoupling" which essentially states that in a true recession or depression there is no segment that is immuned to its negative effects, despite what some folks would fancy. Some will feel it sooner than others but everyone will feel the effects. The idea that they had it coming or that they lost their touch or that they didn't have good execution or management is simply naive. Brace yourselves people and get your overhead streamlined and don't be cocky if you are doing well right now. And good luck!

[Stephen Curtis]

I've been wondering about pods - seems like it wouldn't take much for them to match *$ and that (at the moment) is the "standard". If it can be close enough to that and the US is, well, the US; Fast & Easy.... Definitely something to watch. I think if I let my parents get one, (pod machine) they would like it more than their Silvia/Super Jolly setup, because it would be easier and with less mess. They really aren't that interested in learning the skills that could maximize this setup.

Certain POS systems can track spending habits through their frequent buyer card, if they have one. I know you can look at it manually, not sure about a program generated report; With CSManager. Do not know about the CC tracking.

Marshall Fuss said:

This weekend I was at the Sur le Table in the Ferry Building in San Francisco. I noticed their home espresso displays were about 4:1 pod machines. I asked a salesperson if that reflected their sales ratio. He said "not yet," but that HQ was pushing pod machines and wanted lots of them on display.

[Kurt Stauffer]

That's why my little roastery and lab is set up as a tasting bar and not a cafe. We retail Silvias and other home espresso equipment and the tasting bar is a place for home baristas to get training, buy beans and learn. There's no sense in letting the big box retailers corner the market by selling cheap equipment and pods when coffee lovers can buy good home equipment and beans and learn how to use it. When you are on the right side of any dramatic economic shift you can profit and do good work at the same time.

Marshall Fuss said:

Matt Milletto said:

Interesting Marshall ... do you have a link?

The article is "Coffee Steeps in Value Marketing: Even Pricey Espresso Makers Are Touted as Cheap Starbucks Alternatives." For the faint of heart, beware: superautos and pod machines are discussed. Here is the link for online readers, but it may require a subscription: http://online.wsj.com/article/SB123199028936584753.html?mod=todays_...

[Erin]

I work in a coffee shop right across the street from a starbucks, and there was one night last year when they closed 2 or 3 hours early for a "customer service" training night. To my understanding it was a wide spread deal, they all closed at the same time. Just for that one night our coffee shop was slammed with customers who had intended to go the the green guys, but saw that we were open. We ended up closing late because we were so busy, and giving out discounted drinks to the customers who had attempted to go to the Starbucks. I think we even got some loyal patrons from that group of people who still come into our shop. Imagine if the store closed permanently!!

[Claudia Cabezas]

I don't wish ill will towards anyone, however, here in Houston, Texas I have looked into several possible locations for a coffee shop, but always heard the same thing:"Starbucks has exclusivity."
Now that so many will be closing, maybe it won't be too hard to find a location willing to let us in. Their service has declined over the years, thus leaving the door open for independents willing to provide good service.

[Brew Awakenings]

I, like others here, do not wish ill will on anyone. I worked for Starbucks for 4 years and while a majority of my experienced were truly negative, it was a job.

Seeing as how this response is coming months after the original post, it's amazing to see that store closings are still an issue.
I happen to be in an area where it seems that Starbucks is not the competition, Dunkin Donuts and gas stations are.
People here are not totally open to the fact that quality means something. They see quality in terms of dollars and cents. They want the most for their money and I can't sell 32oz coffee for $1.59 because that's just insane.

Since being at this location, a number of coffee shops have closed or are on their way to closing, including Starbucks. I just hope I can stick it out long enough to keep the independent fire burning. I would love to see the sort of growth that Atlanta is seeing here in north GA.

[Kayakman]

this post is confirms what i have thought for some time... the many in the new coffee culture are just offering better quality and customer service then Starbucks, but not actually anything different or better in terms of coffee culture.

what stop at just being a indie clone of Starbucks and actually start building true community by supporting the arts and other cultural events.

BTW... Starbucks was never cool at any point in its history... they were always JUST an espresso bar fast-food coffee shop offering low quality SO coffee. THEIR BASIC MODEL OF COFFEEHOUSE IS SERIOUSLY FLAWED NOT JUST THEY QUALITY LEVEL. If your highest goal is to offer better quality coffee and customer service than Starbucks.. JUST STAY OUT OF THE INDUSTRY... PLEASE!!! FOR THE SAKE OF COFFEE CULTURE!!!

If all your sayin is that "we can do Starbucks model better" then you seriously low goals in terms of what your offering the communities around you.

[Marshall Fuss]

Kayakman said:

BTW... Starbucks was never cool at any point in its history... they were always JUST an espresso bar fast-food coffee shop offering low quality SO coffee.

Can't let that pass without a little history lesson. Before Howard Schultz's time, Starbucks was a coffee, tea and spice shop that didn't even brew coffee. It was just like their mentor, Alfred Peet's shop, in Berkeley, whose coffee they sold in the early days. End of history lesson.

[Paul Reynolds]

Very interesting, Matt. I was not aware of the closures but happy to read your opinion of the reason. We are opening (in about 60-90 days) a coffee/gelato shop on Sanibel Island where the community forbids formula stores (chains). There's a blessing for a new owner? Shop is named PocoLoco Sanibel, and I thank you very much for this terrific tool to publicize our business and learn about this fascinating industry.

[Gabe Windham]

I don't think that Starbucks is cool at all. Starbucks is the McDonald's of the coffee industry. Make poor quality coffee as fast as you can and get it over the counter. Don't get me wrong I have had to bite the humility bullet twice and turned to Starbucks for work for a few reasons... I needed benefits and they pay decent if you do good work. I was an assistant store manager in 10 months. I had to pay bills while I was fully aware that I could not believe in the product I was selling. I just couldn't embrace the corporate coffee industry very well. I, at that time in my life, didn't understand that I had to stand up for what I believed in a little bit better than that. But the bills got paid and I may not be where I am today in the coffee world if I hadn't paid those bills. Like a dear friend posted earlier, where I live, the competition isn't Starbucks. It's Dunkin' Donuts and gas stations. So I am actually glad that Starbucks has been closing their stores out. However the independents have been taking hits, too. So all I can hope for is that the independents make it through these times and come out on top. Quality is EVERYTHING and some people can't see where that applies. Why not go to a shop that has better quality and is probably cheaper? Why get robbed for crappy coffee?