Earlier this week, Starbucks announced a plan to shutter 600 of its nearly 16,000 stores worldwide. I'm not all that surprised. Starbucks has been floundering for some time, and is trying to reinvigorate its business by introducing new flavors and had previously attempted to get into the sandwich/panini business only to reverse course months later.
They've even brought back their founder to run the business.
There are several problems with the company, and the economy plays only a tangential role.
You cannot expect that every town needs multiple stores within walking distance of each other. Take Ridgewood, New Jersey for example. There are two privately owned coffee shops and a Starbucks. A second Starbucks was opened up less than a mile away, and that was after another Starbucks opened in Midland Park. The company has oversaturated markets that simply do not have an interest in having still more stores. A similar phenomenon happened in Starbucks' home town of Seattle.
You couldn't go more than a block without having four coffee shops on a corner. You would have a Tully's, Seattle's Best, and two Starbucks. It was insane, and the coffee you'd get at a Starbucks cost more than the others, and wasn't nearly as good as a coffee you'd get in Dunkin' Donuts. In fact, Consumers Reports did a taste test report a while back and found that McDonalds did better than Starbucks for flavor and price.
Sure, you're paying for ambiance in the Starbucks, but if you're on the run, it doesn't matter what the store looks like. You want your coffee and you want it quick.
As the economy has slowed and energy prices spiked through the roof, people are looking to cut costs, and spending $3 for a cup of coffee is one of those places. Starbucks ought to look at its pricing structure for improving its bottom line.
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