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Starbucks, Consistency, and Competition

Earlier this week, I wrote about the minor controversy in Missoula, MT over the opening of the downtown's first Starbucks. Now, again via Starbucks Gossip, comes word of an anti-Starbucks column written by a local resident:

While I agree that many small, independently owned espresso shops in America may owe their origin to Starbucks; I would argue that Starbucks, like many corporations, sold its soul on the route to ubiquity. Starbucks coffee has become a symbol of consistent mediocrity. No longer educating the public about coffee, they actually brew mass misconceptions about coffee and espresso (i.e. the caramel 'macchiato').

The downtown Missoula coffee market is more than saturated. There is a place to buy an espresso drink on EVERY single block of the downtown business district. The impending arrival of City Brew (with its Orange Street, interstate-friendly drive-thru) and downtown Starbucks are further pressuring an already pressurized market, hence the predatory practices which bring up the strong revulsion of Starbucks. There is not an open market for espresso downtown. Starbucks is not providing something which is uniquely Missoulian or uniquely Montanan, like the rest of the downtown businesses. It will not draw tourists from other areas to downtown. While each coffee retailer has its own loyal customers who would never darken the door of a Starbucks, that's not the customer base they are worried about. Downtown Missoula greatly relies on the summer tourist dollar. Coffee is of great comfort to the traveler. Before, a downtown tourist would have been obligated to take a chance on a local coffeehouse. Now the siren song of the "consistent yet mediocre" mermaid will be beckoning on North Higgins.

These are not customers who have the time or inclination to experiment with some local flavor. These customers have one shot to buy coffee downtown before they leave. A national name and familiarity is NOT something the local retailer can compete with.

Starbucks is "mediocre", yet its popularity means it can't be competed with? I'm reminded of the famous Yogi Berra line:

Nobody goes there anymore; it's too crowded.
You can't have it both ways, saying, "Starbucks is mediocre; I can't compete with it." If Starbucks is truly mediocre, then surely it can be competed with. And somehow it's "predatory practices" of Starbucks to open up one more espresso outlet when there's one on every single block of the downtown business district? You mean it wasn't predatory when all those other espresso outlets opened up on top of one another?

The author is right in one sense: Starbucks is all about consistency -- that's the nature of the quick-service food business. I don't pretend they make the best coffee around. For example, if I'm in Seattle, I'll choose Uptown Espresso whenever I'm near one. But if I'm on the road, and especially if I'm in a hurry, yes, I'll choose Starbucks -- I like it, and more importantly I know what I'm going to get.

It's said that the greatest weakness of a person or an organization is its greatest strength taken to an extreme, and I generally believe that. If Starbucks' greatest strength is consistency, then its greatest weakness is an inability to adapt quickly or locally. Instead of trying to prevent competition, figure out how to beat Starbucks at its own game. Make drinks they don't make. (Why hasn't someone made an Americanized, Starbucks-style version of Thai iced coffee and popularized it?) Offer customers a different experience than they can have at Starbucks. (Why no fireplaces, especially in cold-weather locations like Missoula?) Give them things that Starbucks doesn't: Pastries baked on-premises. Free Wi-Fi. Donuts. A free newspaper with a minimum purchase -- say, a drink and a pastry (and make it a national newspaper -- travelers don't care about local news). Fresh made-to-order sandwiches. Soft drinks.

Starbucks is neither evil nor predatory. They're powerful, and they have tremendous brand name recognition, and they didn't get that way by making drinks that people didn't want. But they can be competed with. To attempt to deny them access to a local market is anti-competitive, and therefore fundamentally anti-consumer. Moreover, if you don't like Starbucks, don't think you can defeat them by locking them out: you can't. You can only defeat them -- or, more likely, slow their advance -- by being innovative and clever in how you compete with them. And putting up barriers to them isn't going to teach you how to compete: just ask the US auto manufacturers about that.

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Comments

I run an espresso shop in the local library here in Greeley, Colorado and many people say to me that they would not have stopped at SBucks if they knew I was here. SBucks has really changed when I really got into coffee, espresso-they seemed to take the brew seriously. I remember when they would donate their beans to local charities before they were out of date. Maybe they still do that, I don't know (I would'nt bet on it either now). Their beans are everywhere now, in Sams and places. Here in Greeley, they have at least 7 outlets, in grocery stores and several stores of their own. That seems to be all the public knows, SBucks, I'll get checks made out to "Starbucks" --they don't even know what they are doing-all they know is SBucks. My espresso cart is called "OVERDUE ESPRESSO", appropriate for a library. They are getting bigger, too. In Denver, they bought our several Peaberry Espresso shops-too bad. I guess when you are that big you don't worry that your customers will like what you brew up for them-I take it very seriously--and everyone I make that latte or whatever, likes what I do make-it means a lot to me, that is to have a satisfied customer. If I ever make it up to Missoula I'll pass by SBucks and go to the home grown espresso places.

to Paul La Bounty:

hurry up and visit Missoula, Paul. if you wait too long, our local coffee shops will be out of business. Starbucks has built 6 locations in 3 years. they intend to drive every independent coffee shop out of business. that's their practice. it's predatory. it's unethical. and it's a fine indicator of how the "free market" is neither free, nor creates a market.

liquified, please re-read my blog entry. I've explained clearly why I think Starbucks is not predatory. And unethical? Where's your basis for a claim like that?

How many places were there to buy good espressos, cappuccinos, macchiatos, and the like in downtown Missoula 30 years ago? If your answer is anything other than "none", be prepared to back it up.

Here's what I think happened: Starbucks popularized premium Italian-style coffee-based drinks. It took them a while to get to little Missoula (a nice town, by the way -- I had the pleasure of overnighting there a few years ago), which gave local entrepreneurs time to imitate Starbucks and set up their own local premium coffee shops. Now Starbucks has expanded to the point where they can pay attention to markets as small as Missoula, and so here they come. And somehow that in and of itself is predatory?

And exactly how is Starbucks predatorily driving the other coffee shops out of business? Have they bought up all available supplies of coffee? (No.) Are they undercutting their competition on price? (No.) Are they buying their competitors' buildings and terminating their leases? (I presume not.) All they're doing is being Starbucks. If the local coffee shops can't compete with them, honestly, why do they deserve to survive?

Being from Seattle and now residing in Portland, I have seen Starbucks buy out the competition-Seattle's Best in Westlake and Coffee People's here in PDX. Both decided to sell. And why is that? Both had great locations and both were beating Sbucks hands down. I guess everyone has a price. Don't be mad at someone just because they can buy out your local cafe-be mad that you now have to find another little space to sit and read and sip. Be mad at your local espresso owner who sold out to a bigger chain and now drives his BMW thru the same Starbucks that you have to now. Is he crying foul? Probably not.

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