If you’ve been keeping up with news and trends, you have no doubt heard about the downward spiral of Starbucks. This necessitated Howard Schultz, founder, to take back the helm of the floundering coffee kingdom. Amidst this, fast food chain, McDonald’s, claims they are going to take a significant portion of market away from Starbucks by offering coffees, lattes, and cappuccinos in their new McCafe’s.
Can McDonald’s Win?
The answer is “no.” Although McDonald’s is making a dent they will never have the same environment as a Starbucks. Many still see the McDonald’s brand as a family/kid friendly hamburger joint. The tile floors make the space very noisy and the booths do not invite patrons to slide over a chair and chat. I am sure the breakfast crowd will like the new selection of coffees as they drive thru, but for the most part, the stores are designed for something entirely different than what you get in a Starbucks experience.
Can Starbucks Survive?
The answer here is “yes.” Starbucks can and will survive. Howard is supposed to announce his strategy at the end of January 2008. We’ll wait and see what he has to add to his previous pronouncements of slowing domestic growth, growing internationally, and a new health-oriented product line. Until then, let me make a few suggestions and observations.
- The stores are designed with a lot of flat surfaces and hard floors. These make the environment too noisy. It is becoming harder to hold conversations. Have you ever tried to talk on your phone when the barista is making a latte?
- Lose the gimmicky unrelated products. I am not going to play Cranium while at Starbucks. I am not going to buy Cranium while at Starbucks.
- Lower the price of your coffees. A friend of mine choked after he added up how much he was spending on Starbucks each week. He now goes a lot less.
- Offer free Wi-Fi. This encourages people to stay and when they stay they buy.
- Get the people up front to be proactive and up-sell products. Give out samples. Encourage patrons to try new things. Who knows, they may become their favorites and when they do, they will tell their friends.
In my area, the biggest threat to Starbucks does not come from McDonald’s. It comes from Panera Bread. Panera has good coffee, good bagels, great salads and soups, and free Wi-Fi. I see people all the time in there with laptops and food. There are two in my near vicinity and they are always packed. I was in Starbucks last week and this morning and there was only 9 people. The drive-thru was not very busy either.
Wise up Starbucks! You are no longer the only player in this space. You can be on top again with some well executed strategy that involves listening to the customer and improving the brand.