Starbucks Closing 600 Least-Profitable U.S. Stores
You probably heard the news yesterday that Starbucks is closing around 600 of their least profitable locations. The Associated Press story on CNN Money has the best details.
While your first reaction might be “yikes!” – good or bad economy – I think this is a good for Starbucks.
But before I get into that, let me provide a little more background…
While it may seem excessive to have “a Starbucks on every corner,” Starbucks is no dummy. Site locations have been strategically selected using sophisticated traffic-mapping tools. They’re not opening simply to open. They’re putting them where their customers are.
For example, in New York City, a store to the left of a subway exit gets a completely different group of customers than a store to the right of a subway exit. Despite the fact you may be able to read the menu board of one store while sitting in the other, there has usually been enough customer volume to support the closely arranged locations.
However, the challenges of the U.S. economy and reduction of traffic to Starbucks has changed the game. Cannibalization is having a considerable affect on overall sales. As Starbucks Chief Financial Officer Pete Bocian commented, closing these locations will help return some of that revenue to the remaining stores.
Not only is it going to be a messy process (termination of leases, severance packages to those let go, etc), but these are issues never before faced in the history of the company.
So, why do I say this is good for Starbucks?
The company has been pushed to grow faster than it should by Wall Street and shareholders. Like a high-potential student pushed by its parents and teachers to not let everyone down because “we all expect more from you than the others,” the company has stretched itself to the point of exhaustion…
Starbucks says they’re in the “people business serving coffee.” However many of the baristas are merely “serving coffee.” And at that… not steaming fresh milk or pulling quality espresso shots. So while they’ve been efficient, the quality of the products and services are not where they need to be.
The best thing for Starbucks to do is use the store closings and slow-down as a timeout to focus on training and keeping partners (employees) who can deliver the “Third Place” service experience and hand-craft the best beverages on the planet.
The lesson for your company?
don’t miss the speed limit signs.