Starbucks announced it is closing 600 stores in the US over the next year, or about 20% of those it opened in the past two years. 12,000 employees will be affected. This is the first major rollback of Starbucks expansion in its history.
To some extent, the problem is saturation of the market and cannibalization of profits from competing stores. But the deeper problem clearly is that people are just not buying as many cappuccinos as was predicted. Even more than gay marriage, the mass closure of Starbucks is a sure sign of the apocalypse. (Or at least, of recession.)
Tuesday, July 01, 2008
The Bold, Astringent Aroma of Recession
Posted by Dr. Strangelove at 4:05 PM
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And think about all the mom and pop coffee shops they put out business first.
Starbucks comes in dumps their coffee on the local market, puts the competition out of business then raises prices...only sometimes it doesn't work and they have to close down their operation.
Of course I don't drink coffee so I only care about it as an economic data point.
Speaking of economic data points, a friend of my parents' is an Econ professor and part time antique dealer. She keeps track of the economy by looking at the quality of the jewelry on sale at pawn shops. When the quality goes up, the economy is going down...quality's been up lately.
I'm not sure it's a deep problem, except for Starbucks. For people with rising gas costs, the most obvious place to cut back is in the luxury spending they believe is the most conspicuously wasteful (spending upwards of $3 for a fancy cup of coffee). Like most such decisions by American consumers, it is also a cutback that will be relatively ineffective and painless but has the feeling of virtue. You get to experience your "sacrifice" every day! [FYI, this is why, for lent, I typically give up coffee (altogether). Because refraining from that beverage is a modest sacrifice that is experienced daily yet primarily mostly symbolic - every morning when I reach for the teabag instead of that sweet, sweet cup of joe, my mind is brought to think of something more important than myself].
Now if there's a fall-off in alcohol sales, then we know we're in serious trouble. That would be an indication of real want, not thrift. The first miracle was turning water into wine, you know. And down to the last hobo, we treasure it still as a sublime gift of heaven.
RBR, I don't think Starbucks ever engages in predatory pricing. They always enter a market with the same crazy high prices they have everywhere. This puts others out of business because Starbucks is not selling coffee. Consumers believe that - for what they perceive to be a de minimis extra cost above the old coffee shop brew - the $3.50 latte from Starbucks is both a treat (food as psychological reward) and a status symbol of real middleclasshood. At Starbucks, people fiddle on laptops and talk on cellphones. They even encourage this behavior. They play safe jazz and create the same quasi-corporate franchise atmosphere everywhere. Starbucks is instant cache. It is a Known Quantity for a middle class that seeks the reassurance of its class status in the display of major brands. It's a far cry from the workaday cup of Dunkin' Donuts coffee or, even worse, the thermos that blue collar workers tote to the factory in movies about milltowns. (You have to be young, urban, and really hip for such things to be retro and, thus, even hipper than the Mermaid, as apparently Dunkin' Donuts coffee is in some circles - but even that has to be a known brand, because the US Donuts near my house would not be hip or faux classy).
Sadly, Starbucks' acrid roast is no great gastronomic achievement, but ya gotta love marketing. The smallest they sell is "tall." What a bargain.
Good as Gold: from the Onion from 2001 about Starbucks That pretty much says it all.
Personally I'm hoping that people have finally worked out that their coffee is rubbish.
Well, to be honest, I don't KNOW that Starbucks does preditory pricing - I don't drink coffee (good or bad). But I've heard a lot of anti-Starbucks people complain about it.
As far as I know (and I'm technically an antitrust lawyer as far as my company is concerned) there's never been an antitrust suit against Starbucks. In fact, it was General Foods that flirted with antitrust action in the pre-bucks period for predatory pricing.
Spotted Handfish, you are right that it is bad, burnt, acidic coffee. But you have to remember that in the heyday, it was better than it is today, back before everything was frappicino,doule mocha, soy, etc. And it was way better compared to the colored Uban water that was being passed off as coffee in most other places.
What Starbucks did was start the coffee and cafe culture in a real way in this country. Before Starbucks, there were few real cafes or places for young people to hang out. And those that existed were burger and coke joints. At the very least, Starbucks encouraged others to come into the market and now young and old people alike have a safe place to hang out. And they have choices of what kind of cafe they want to go into. We have two Starbucks in my town, including a drive through, and a ton of other independant cafes. And they are all doing brisk business! So that, I am greatful to Starbucks.
Before Starbucks came to San Antonio, we didn't really have coffee houses--who wants to drink coffee in 100 degree heat. But now there are mom and pop places all over the place. If anything, Starbucks encouraged the coffee house craze.
HB - the weather didn't change, did it?
So people insist that drinking hot coffee in hot weather actually cools you down.
Other just mix it with ice, sugar, and cream and call it Frappicino. Man, that sounds good about now . . .with mint.
No, the coffee got better.
http://www.theage.com.au/opinion/memo-starbucks-next-time-try-selling-ice-to-eskimos-20080802-3oyp.html?page=-1
Sorry, never can remember how to make the links nice, and Spotted H isn't here right now to tell me how.
Just a little article on the Starbucks closures in Australia - they're closing a much much higher percentage of stores than in the US, which doesn't surprise me one bit. I didn't actually realise that they had a store on Lygon St though - it's the heart of the Italian precinct, where you can find some of the best coffee in Melbourne (and Melbourne is where you find the best coffee in Australia) - seems a rather dumb place to put a Starbucks to be honest, but maybe they were hoping for tourist dollars?...
Oh, and the comment about McDonalds in the article? In case you were wondering, down here, you can buy a McOz burger - it's got beetroot in it :-)
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