Sunday, January 4, 2009

Starbucks failing forward? A busted business decision?

Tonight, while coming home at 9:20 p.m., I stopped at a Starbucks with my girlfriend and noticed a car in drive thru, lights out at the store and workers walking out the front doors at the same time. Since we wanted to stop for a hot coffee & hot chocolate to enjoy while watching some rental movies we decided to go to McDonalds and enjoyed lower prices (reasonable) and a good product. Now, in our opinion, McDonalds is a more viable option as we had a pleasant experience with their hours/product and it was cheaper to boot! Starbucks new hours encourages people to try McDonald's McCafe coffees. I believe other consumers will agree with us on this.

Has Starbucks strayed from the image of their brand as a consumer friendly coffee hangout to one of "corporate coffee?" Will they end up with a new brand image and just be relegated to "that expensive coffee store" and will their brand get re-shaped by the competition via press/P.R./buzz. So far I haven't seen a big negative effect but I think there should be a high degree of concern.

The reason Starbucks ran into problems was due to cannibalizing sales from other stores, ridiculous overexpansion, not measuring store profitability, etc.

Longer hours may have hurt profitability but it helped them connect with their customers, some of whom read books, met with friends, etc. Now Starbucks is playing defense. They are no longer the hunter; they have become the prey. Customers are being met by dark stores and late night lattes are no more....Every choice has consequences and I think Starbucks EXTREME focus on profitability may have swung the pendulum too much towards short-term profitability vs. long-term success.

What are your thoughts? Has the profitability pendulum swung too far at Starbucks and have their recent decisions risked future profitability too much? Have they alienated any customers with their hour changes?

Dan Ross

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