Real Estate (Agents?) Causing Starbucks Downturn?
Starbucks Chief Executive Howard Schultz thinks the downturn in real estate is causing sales at his stores to take a dive. But I am wondering whether it is because of the general hit to the economy or the amount of real estate agents who have had to kick the habit as their revenue has dropped.
Face it, real estate agents have to be one of the highest caffeinated groups around with the constant zooming between all of the hundreds of details it take to sell homes. Could the Starbucks decline be a sign that foretells a significant drop in agents out there?
But seriously, for many of us Starbucks is a luxury. Add to that the company has seriously overbuilt for the demand. In our small suburban community there are 3 different Starbucks including one in the local Target. I think that like many companies they overestimated demand in good-times and now have to ratchet back as the economy slows.
Starbucks has long said its $3 to $5 coffee is an “affordable luxury,” but that assumption is being challenged because consumers are spending less on everything, from dining out to buying clothing, as home prices fall and the cost of necessities such as gas and fuel continue to rise.
“We’re an affordable luxury, but there are forces of nature here that we can’t control,” Schultz told journalists.
He told investors: “You have an economy that is really in a tailspin.” via Reuters.
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Comment by dean on 20 March 2008:
Tommy,
Starbucks growth strategy is similar to what Nordstrom dept stores executed in the late 1980’s. Build stores on top of each other with the idea that “saturation” and availability will eventually capture a market.
Nordstrom ended up with many new stores that “canibalized” sales growth of old established stores in a region.
The example of this was the Tyson’s Corner, VA store, first store built on the East Coast, which began losing growth to the Pentagon City store and others built within 15 mile radius in Maryland.
The other HUGE factor is the fact that Starbuck’s charges an obscene $20 per month for WiFi.
As a consultant 90% of my meetings are held in coffee houses. We avoid Starbucks due to this policy; in turn they lose my 5 lattes per week business along with whatever my client would order.
Comment by Jim Reppond on 21 March 2008:
I still frequent Starbucks daily, just not three times daily like before. I agree with Dean. Anyway, what about the mortgage brokers? Maybe Howard should look at his own blog and see what others are saying. (www.mystarbucksidea.com) Everyone I talk to says they are either tired of or offended by being asked to pay for Wi-Fi. It’s 2008 for God’s sake! NO ONE charges for Wi-Fi anymore. Wake up and small the coffee roasting…. wait a minute! Where’s did the coffee roaster go?
Pingback by Seattle Real Estate | The Seattle Specialist on 21 March 2008:
[...] a source of quality coffee and a great meeting spot outside the office conference rooms. But for Howard Schultz to suggest Starbuck’s problems are MY FAULT? Gimme a break! What about the mortgage [...]
Comment by Brian James on 5 May 2008:
I stopped, and decided to bite the bullet on a personal Espresso machine http://www.capresso.com/automatic-coffee-centers-s9-avantgarde.shtml
Pingback by Starbucks And Landlords Battle Over Store Closings : The Real Estate Bloggers on 13 October 2008:
[...] I still blame the real estate agents for Starbucks troubles. [...]