Starbucks by any other name

Starbucks has begun opening coffee shops under different names. Each location has a different identity and and as I understand it different decor. The company is trying to appear to be a small local business in each community. The idea that Starbucks can reinvent itself as a collection of local coffee shop is plain dumb. The early sales results are confirming this. The new stores put in existing locations are generating significantly lower sales than the original Starbucks.

Be who you are. Starbucks is willing to pretend it is whatever they think the customer will buy. Naming each new location for the street on which it is located, but running it just like they do every other Starbucks is about as disingenuous as a company can get. At this rate, Dunkin Donuts, McDonald's, and even the local coffee house need only to stay the course, and wait for Starbucks to self- destruct. How long might that take? Ask Blockbuster Videos, KB Toys, Krispy Kreme, Wickes, and Sharper Image stores. Admittedly, all these major brands faced widely different and profound marketplace challenges before their demise, but in the end they all share one trait - they failed to be true to who they were while still innovating.


Starbucks is caught up in an expansion death spiral for the sake of their stock price. It’s a nonsensical grip that has many successful companies around the neck. How is it possible that every company can expect double digit growth forever? When did the definition of corporate success morph into share price above all else? When did profit through budget management succumb to growth at any price? Where is it written that companies can't have up AND down sales years and still be successful? Must every week be a 52-week sales and stock price high? Adding more stores to disguise declining year-over-year, same-store sales is what executives do at big companies to protect their bonuses, and stock options.

Starbucks stopped innovating and started replicating. Expansion trumped innovation. “More customers” does not always mean more business. One of the best exercises in the world is asking yourself, "If I didn't add a new customer for an extended period of time, what would it take for my existing customers to continue to do business with me at a rate and margin that would sustain me?" AND then, do that! It makes sense that which is authentic and encourages existing customers to do more business with you will also be an ingredient necessary to attract new customers.

Could Starbucks be a successful company if it focused on being a better company rather than a bigger company? I think so. Starbucks could be turned around but it is very doubtful it will be because the leadership is locked in to a compensation plan that is driven by a "case count" mentality rather than raving, satisfied customers.

The Decline of Starbucks

I'll try to keep this short and sweet rather attempt to detail the long and illustrious history of Starbucks that has been so well documented elsewhere.

A client made the observation the other day that he considered Starbucks to be a model brand because it established a value proposition and market leadership position while completely avoiding the typical trappings of retail competitive pricing.

This led to an interesting conversation since I couldn't have disagreed more with my client's position. Undeniably, Starbucks is a brilliant brand. I often use examples of Starbucks to illustrate points in my various workshops and speaking engagements. My usual references emphasis the various facets of its unique positioning, powerful brand, and the enormous growth the company achieved without having relied on consumer advertising, which most people consider a cornerstone of brand building. But I will leave that aspect of my opinions for another time.

While I am a fan (but not a customer) of Starbucks, I believe its market strategy has its flaws. To suggest that Starbucks avoided pricing as a cornerstone of its brand positioning ignores the recent and rather rapid decline of the company stock over the past couple of years. Dunkin' Donuts, and McDonald's have landed severe body blows to Starbucks in the battle for premium coffee supremacy by being "more affordable" and a better value than the industry leader. The situation grew so severe that the company founder came out of retirement to replace the CEO and rescue the enterprise.

In designing and adopting a positioning centered on self indulgence, meant to justify premium prices (some would say highly overpriced), the company has absolutely declared a brand centered around price.

My client argued that the current economy and consumer belt-tightening have more to do with Starbucks' decline, and while there might be some truth to that, if we were just talking about a sales decline, I might agree. But I believe market share has definitely, and perhaps permanently shifted to the lower cost alternatives. If the Starbucks' value proposition was genuinely based on something other than premium pricing, the decline in sales and market share would not have been so rapid or so severe. At no time did Starbucks' customers, or the public fail to recognize this was an expensive/overpriced cup of Joe. In flush times, people were more accepting, but make no mistake, the rub was always there.

Starbucks greatest challenge is ahead. Once this economy shows signs of recovery how will it explain what I believe will be a continued decline in its business? Once people have altered their behaviors, it is very hard to win them back. Starbucks is yet another example in the marketplace of how consumer behaviors, based on little more than instant self-gratification will erode.

One of my favorite expressions (I think it comes from Tom Peters) is: "Every condition necessary for your best customer to leave you is in place and moving full steam ahead." The challenge of any management team is to forestall that exit by adapting while still keeping the brand authentic, relevant and consistent.