This morning’s Wall Street Journal article reporting the closure of 500 additional Starbucks stores got me thinking about how naïve I was when I actually believed what I read in the original Starbucks story.
When the news about Starbucks’ financial problems began to surface last year, accompanied by the leaking of the now infamous memo from its founder, Howard Schultz, detailing how the brand had lost its way and needed to return to its core, I actually believed that he had identified some of the causes of the company’s reversal of fortune. In fact, I copied and distributed to my class on branding, copies of the initial articles and of his memo.
While Mr. Schultz’s admonitions to respect the company’s roots and return to the principles, which supported its success, provided great jumping off points for academic discussion, they apparently did not identify what really ailed the company. While his statements supported his purist and maverick public status, made for good press, and might have even eased his return to the helm of his weakened enterprise, they now appear to have been little more than window dressing for a fairly standard cost cutting Wall Street approach to fixing a business.
Even at the time, I was puzzled by his assertion that rapid growth was the company’s biggest enemy. Why, I asked, was having a large number of locations an impediment to delivering an authentic European coffee house experience at each location? It may be that growth was unhealthy but it was not the growth, I thought, that caused the company to lose its focus on its special coffee house experience.
But now, as we witness the company’s actions, not their public relations inspired pronouncements, we begin to glimpse what really went wrong with the Starbucks experiment. Now, it makes more sense that its real estate expansion is a principal culprit.
According to the Wall Street Journal article two real estate principles supported its march to ever increasing numbers of locations: long lines at existing stores and research that showed that customers, presumably thirsting for the taste of Starbucks premium priced coffee and eager to pay twice or three times the cost for one cup, somehow would not cross the street to find their treasure. Crossing the street, the research concluded, was enough of a deterrent to send the customer sipping an inferior alternative. Both these principles supported the strategy that Starbucks needed more stores, sometimes down the block, sometimes across the street from its existing locations.
While the absurdity of these strategic conclusions should raise serious questions about the competence of the experts who came up with this stuff, and those who executed the strategies which were developed to respond to these perceived threats, it seems an unfortunate, but safe bet that Starbucks will not be one of those businesses which re-examines its core brand values and returns to health by understanding the sources of its strength.
Sphere: Related Content
0 comments:
Post a Comment