Lax Real Estate Decisions Hurt Starbucks

New York Times:

Starbucks wants to get back to its roots to help turn around its ailing fortunes. It brought back the pioneering chief executive Howard Schultz to run the coffee chain day to day, and it has introduced a new blend, Pike Place Roast, that harks back to the location of its first Seattle store.

Yet for all the new marketing efforts, Starbucks's biggest mistakes and greatest challenges boil down to three words: location, location and location.

This week, in an announcement that surprised even analysts who have grown accustomed to bad news from Starbucks, the company said it would shutter 600 "underperforming stores," and significantly scale back plans to open new outlets.

Read the whole story: New York Times

Comments

[internCyndi]

i'm not a huge fan of starbucks either -- i just wish they would invest in using fair trade coffee. for as much as people keep going on and on about how starbucks is an evil corporation and that people should go to independent coffee shops - do you know where the independent coffee shops get their coffee from? i think it's each of our individual responsibilities as citizens and humans to find that out and only support the companies that use fair trade coffee. that way you know that the workers are getting fair wages and fair working conditions. a new site just launched -- www.starbuckers.org that talks about a lot of these issues. check it out!

[Gasparilla]

The Pike Place is the best thing they ever did. The regular stuff tastes like a drained crankcase. It doesn't even have that coffee "smell".

[mouselion]

Hate to use the "K" word -- but if the shoe fits...

[paulbikes]

Might i add,

a "frescante" at donkey coffee in athens ohio costs 3.85, and its massive, and very tasty. the same from starbucks would cost 6 bucks and taste terrible.

i almost always get coffee with a touch of sugar and milk, but even starbucks makes that suck.

[paulbikes]

Starbucks sucks. always did.

check out your local independent coffee shop if starbucks or another sucky chain hasnt forced it out of business.

[Gary47]

For years they've been massively overcharging for cheap coffee-flavored sugar and milk. Don't suppose that had anything to do with it.

[Weathermaker]

Starbucks is not expensive for me because I drink my coffee black, which makes my Starbucks coffee less than $2.

[JaseAllen]

I have never been to Starbucks and I intend to keep it that way. It is obscene to pay $5 for a coffee drink you can make at home for pennies on the dollar. I do make them myself. It's not like it's hard or expensive.

And for the last time, a real "latte" is /not/ a coffee drink. The word latte simply means milk.

[NTO08]

Thank you...Starbucks is to coffee as learning is to Cliff Notes...fake, and a lousy substitute.

[Eric8869]

Then you're a loser

[JaseAllen]

You think I'm a looser for not wasting $5 on a mediocre coffee drink? Then so be it. I'm a looser, but one with $5 more in my pocket than you.

[SeaBoatbuilder]

I grew up 4 blocks from the original Starbuck's store in the Pike Place Market in Seattle, and have fond memories of going down there every Saturday with my Dad for his weekly 1/2 lb of Sumatra coffee. At the time, coffee that good was virtually unknown to a country raised on watery crap that came from a big can that was roasted, ground and vacuum packed 6 months before it hit your can opener.

Why does America love the underdog, but hates it when someone does exactly as they're supposed to do? Howard Schultz lived an entrepreneur's wet dream by buying a 10-store local chain and turning it into an international colossus, and like any organization they struggle to maintain quality while growing to support the American mantra of perpetually increasing "shareholder value". Whether you love, hate, or are indifferent to Starbuck's, they rightly deserve the credit for generally raising the quality of coffee in this country. Without them, the demand curve for coffee that gave us Tully's, Peet's, Caribou, SBC and thousands of local coffee shops simply wouldn't exist.

Even though I sometime refer to Starbuck's as "McJava", on even their worst day it's heads above the undrinkable swill in a styro cup that passes for coffee elsewhere. I wish them luck in their quest to attain the other US business mantra of "rightsizing" even though Wall Street will beat the crap out of them for daring to look past the next quarterly report.

[Gary47]

Credit sure, for "generally raising the quality of coffee" - about 3 decades ago. That credit has long since evaporated. Like most everything else from the 80s.

[GhostOfSchlesinger]

Schultz, who left a salaried position to work for free at the outset, connected several quite distant dots - Italian baristas, a hip atmosphere, an nichy product, and perfect locations. He also fought fiercely for fair compensation at every level of his organization, offering unheard of benefits and opportunities for employees and demonstrating sensitivity to the market stresses revolving around human capital.

With Schultz back at the helm, corners will no longer be cut. The watered down brand will be restored. Locations will be vetted. And growth will return.

I'm culturally and politically left wing. But boy am I a capitalist. I wish more of us on the left could own the idea that, ala Ken Wilbur, we must "transcend and include," meaning that we are more than capable of building hybrid organizations that fulfill our social and cultural aims while doing something that's more than a little okay - rewarding innovation.

Howard Schultz was and is a REALLY COOL entrepreneur that built a REALLY INCREDIBLE company - for his employees and for the communities it occupies. Is it perfect? Probably not. Absent his leadership, did it fall prey to the typical, shortsighted Wallstreet "wisdom" of artificial targets as opposed to sound business practices? Yep.

Will Starbucks emerge stronger post a few years under Mr. Schultz's leadership.

Most certainly.

Bravo, Mr. Schultz! And best wishes in your work of reinvigorating the brand you built.

[vippy]

Starbucks simply lost business due to the high gas prices. Many of us who had disposable income is now going for gas, utilities and the rising food prices. Simple as that.

[NTO08]

There is nothing sadder than those who bought in to Starbucks awful brand...

[folksonomy]

I admit it; I was a Starbucks Addict for many years up until about a year ago when I had to swear off caffeine due to health reasons. That being said, who amongst us here in the U.S.A. did NOT see this coming? "Over-expansion" anyone? "Breakfast Sandwiches"? "Music Retailer"? Once a retailer is completely ubiquitous, it just takes the edge off, more or less.

I hate seeing stores closed because it means a loss of jobs, but it's kind of a "told you so" scenario.

[wm1066]

I stopped coffee about six weeks ago for health reasons and alot of little chronic problems cleared up. But the most dramatic was a certian type of headache and depression went away.

[johnmorgan]

Loss of jobs? Less Starbuck's stores will make more room for locally-owned coffeeshops.

In fact, I never patronize Starbuck's, precisely because they've tried to take over the world. I give my money to locally-owned coffeeshops that care about their community.

[trinity]

That would be nice, but could the local ones survive? When people are paying over $4/gallon for gas, it's hard to shell out $4 for a coffee drink.

[Eric8869]

a lot of the people positng here obviously don't live in big cities. Those of us who do know that Starbucks often helps revitalize areas that were crime ridden and dangerous.

A Starbucks in your neighborhood in the city is a good thing.

[YellowDogInRedCounty]

Well, yes and no. Oftentimes when they move into a city they do it specifically to put smaller independent coffee houses out of business.

As a person who used to own an independent coffee house, here are the things I think Starbucks has gone wrong on:

1. Too many locations as the article stated
2. No more REAL baristas. The espresso machines they use now are all automated so the person operating it only has to press a button. This removes the necessity for the person operating it to have the skills to recognize the proper grind, the proper packing and the proper water presser and temp...all of which combine to make a good pour with the right amount of crema. Of course, when you order a drink with flavored syrups and all kinds of other 'add-ons', I suppose nobody can taste the difference anyhow
3. Too many different products that have little or nothing to do with coffee

Anyhow, that's just my humble opinion.

[truth101]

Columbus brought back coffee and the pope thought it was cool...thus the
ITALIAN THING. STARBUCKS will be replaced by a chain called Angelo's
which is officianlly sanctioned by POPE BEN....offering tours to italia and olive oil
and assorted tapes of BENS SPEECHES.....TEN YEARS FROM NOW STARBUCK
WILL BE FORGOTTEN, TOTALLY A MEMORY OF A SEATTLE RIP GONE WILD
THE FIRST 600 AND COUNTING

[Eric8869]

There are NO independant coffee houses going into the neighborhoods I'm talking about.

[NTO08]

How?
Driving mom and pop businesses out?

[Eric8869]

There are not mom and pop businesses revitalizing bad neighborhoods in the city.

[1will]

I saw a video last year of a office worker that would get to work early enough to pee in the coffee pot every morning before making the coffee.
His coffee was probaly still better than Starbucks.

[NTO08]

By a long shot...no pun intended...

[Budokan]

They're coffee is lousy anyway. It's too bitter and way over-priced.

[NTO08]

So true...it is swill...for people who have no clue what coffee is about.

[mamacat]

Most of the independent coffee shops that I have used were not as good as most of the Starbucks that I have gone to. They still do a good job.

I do think it is a mistake not to grind their own coffee in each shop. I love that fresh ground smell.

[truth101]

The coffee was never the point....it was always just a kind of singles club...
think of the millions of courples who met in line there......the coffee is just
the excuse ...... everyone knows that....these 600 locations must have
been in settled areas without singles.....that is the truth

[NTO08]

If people need to meet at a lousy coffee mill to hook up, it says a lot about the losers who went to Starbucks...sad and pathetic!

[johnmorgan]

No, I don't like the coffee I've drunk at Starbuck's. It was just hot water with a slight coffee taste.