I’m sure that you’ve all heard by now that Starbucks is closing 600 stores in the U.S., which amounts to a total of 12,000 jobs that will be lost as a result (although that really remains to be seen, as most are expected to simply transfer to a nearby store that won’t be getting the axe).
To some, this reeks of recession repercussions. Starbucks themselves have even blamed the weak economy on its decision to close these stores. But I have to play devil’s advocate (one of my favorite hobbies): isn’t it possible that they simply expanded too quickly and aggressively? It’s not just that there’s a Starbucks on every corner anymore. There are two, sometimes three Starbucks to an interserction!
Houston herself has the ignominious distinction of being the first city to host dueling Starbucks sitting resolutely across the street from each other in River Oaks (at West Gray and Shepherd). In the shopping center across the street from where I live, there are three Starbucks. THREE. It’s overkill. Of the three, only one is ever busy. The other two languish in their oversaturated locations, their employees idle and their epsresso machines dormant.
The overhead to maintain these stores and the cost to not only pay the employees, but also provide health insurance to them, must be astronomical. Health insurance in particular is an enormous part of a company’s SG&A, often being the second or third most costly expense on their books. Trust me on this one.
So couldn’t it be Starbucks’ recent, unmitigated growth that’s more to blame for their need to close down underperforming stores? Couldn’t it be all the stores that aren’t serving customers and simply costing too much money to operate, because they were opened in a location that was already served by a nearby Starbucks? Haven’t they ever heard of self-cannibalization?
Moreover, what about competition from other coffee-selling establishments? Bubble tea and tapioca houses — particularly in Houston — seem to have no shortage of customers, nor do locally-owned and operated places like The Coffee Bean. I know it’s hard to imagine Starbucks budging even one iota on their market share, but as more people become conscious of the environmental impacts of buying fair trade goods, staying local and supporting smaller stores, I’m sure that even a giant like Starbucks could feel the prick of lost customers over time.
I think blaming the economy for this is a particularly weak move on the part of Starbucks, and one that the general public unfortunately won’t see as a convenient excuse for bad strategic planning. They’ll simply eat it up as yet more proof that we’re approaching the next Great Depression and the self-fulfilling prophecy will continue miserably on its path.
But that’s just my two cents. What do you think?