People learning the Latte Factor is real

[jeffrey]

Starbucks Corp. (SBUX) said it will close 600 underperforming company-owned stores and further cut its U.S. expansion plans for the fiscal year starting this autumn amid growing economic uncertainty heading into the summer.

The move cuts even deeper into already reined-in expansion plans at the struggling coffee giant, which is in the midst of a sweeping restructuring. Tuesday's announcement compares with its April expectation of a net "less-than" 400 new U.S. stores each year from fiscal 2009 to 2011...

Starbucks To Close 600 Stores, Halves 2009 Expansion Plans

[disneysteve]

It seems that companies never learn. More companies have gone out of business due to over expansion over the years than virtually any other reason. They insist on thinking that if one store is good, two must be better and a thousand must be incredibly better. What they always fail to realize is that as soon as something isn't special anymore, it loses it's appeal. Plus, they cannibalize their own business by putting multiple stores in close proximity to each other, all vying for the same customer base.

[Joan.of.the.Arch]

I think I can say b'bye to the Starbucks closer to me. It was opened since 2006 as were most targeted to close. They do a constant, though not heavy business. I think their marketing research could have been better. They are very close to the busiest traffic corner in the city, but there is not really all that much foot traffic there. And because it is also the highest traffic accident corner in the city, I think a lot of people just want to drive on through, not get rear ended as they pause to turn off the street to go into Starbucks.

None of the other businesses on these four corners appear to be doing all that well (there is a newish strip mall with portions that have never been leased), except the chain restaurant which serves an area which had no sit down restaurant (just fast food) for a couple decades. The location is a meeting point of several neighborhoods: One rather poor with a lot of chronic unemployment, one barely hanging in there lower working class, and one middle class, but holding on by virtue of a lot of social security and pension dollars, plus the influx of Bosnian immigrants who've been gung ho at starting their own businesses, including shops where one might have coffee or tea and baked goods (sound like Starbucks?) So there are just not a lot of Starbucks patrons around, if you ask me. Yeah, they should have asked me.

[rob62521]

Years ago when I was in college I took a class on Chicago. We walked in neighborhoods and took the el and so on. We studied local businesses and local history. Back then McDonalds supposedly did market research and would not open stores too close to one another and only chose neighborhoods where they felt a profit was a sure thing. I don't know if McDonalds still does that -- we have four of them in our town of 83,000, but it seemed like a wise idea. Too bad others don't subscribe to it.

[disneysteve]

I've read in the past that Starbucks analyzed traffic flow, especially foot traffic, and also customer load at existing locations to help decide where to put new locations. That is why in some places, like Manhattan, there are stores literally across the street from each other. In one office building, there is a store in the lobby and another one many floors up with some other shops.

But it has to reach a point where they oversaturate the market with locations.

Also, as I said, I think too many stores makes it not special anymore. I used to love shopping at The Disney Store. There was ONE location in my area, and that was about 30 minutes away. I would go there regularly, a couple of times per month. I knew all the crew. They would call me when something new came in that they thought I'd be interested in. I would hang out in the store chatting for ages.

Then they started putting stores in every mall. Stuff that used to be unique and hard to find became mass produced junk that everyone could get anywhere. The stores lost their appeal and business gradually declined until they ended up selling them to The Children's Place. That failed as well and now many malls have lost or are soon to lose their Disney Store. Disney is taking over the stores again in hopes of revitalizing them. Hopefully, they will bring back the old magic, keep the number of stores limited and make them special again.

[aevans1206]

I know people who go to Starbuck's two, three times per day. Each latte or frappuccino is eating away at their income, frivolously. Perhaps many are finally figuring out that cutting out the constant coffee from Starbuck's and perhaps making it at home/work is a good cost cutting measure. I am a coffee drinker, but I've invested in a good grinder and nice costco beans to offset my need for caffeine.

[JanH]

I, too, wondered why there are Starbucks in the same shopping center or across the street from another store with one in it. We have at least two right across from two major stores--one a Target and one a Kroger's. It seemed a little saturated to me, but I guess the free standing ones have room to sit and read and music while the others are just buy and go while shopping. I guess they have different uses, but it seemed that--all of a sudden--we had Starbucks everywhere. I wonder which style of store they will keep around here.

[hacik.istanbul@yahoo.ca]

This is clearly a matter of economics where fiscal tightening will impact overall sales. When the economy slows down, people are more careful to spend that extra dollar. All business growth has to be reviewed based on the market and consumer needs in order to sustain itself.
Hacik Istanbul

[rob62521]

JanH, you mentioned two Starbucks very close to each other. That's the same thing here...we have two for the whole city and one is located in the Target and the other is in same parking lot as the Target. I think it would have been better to have placed it elsewhere in the city instead of right next to each other. Of course, what do I know?

[vsjhoc]

Originally Posted by disneysteve

I've read in the past that Starbucks analyzed traffic flow, especially foot traffic, and also customer load at existing locations to help decide where to put new locations. That is why in some places, like Manhattan, there are stores literally across the street from each other.

I read this also. They found that if a store was on the side of the street where you habitually walk (e.g., going to work, etc.) you were more likely to stop than if there was one on the other side of the street. How lazy have we become.