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Old 07-07-08, 07:26 AM   #1
ManBearPig
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Starbucks closing stores

By now you have heard that s-bux is closing many stores. This story claims, "Some coffee fans get grim delight in Starbucks woes."

http://www.reuters.com/article/newsO...37926720080706

I admit I sorta' share in a touch of that enjoyment. Perhaps I'm a hypocrite, because I do find myself frequenting Starbucks more often than my wallet and budget would like me too. But I also blame part of it on the addiction, and there is a touch of resentment that I am paying 4 bucks for a coffee drink.

However, I am not so sure that Starbucks hurts small business. If anything, it would seem to me that a mammoth corporate coffee chain presents an opportunity to the small entrepreneur local shops to distinguish themselves in the eyes of their patrons. When I go to Starbucks, it's for the convenience. But when I go to my local shop now, it's for the atmosphere as a break from the fast-food type distribution and consumption of coffee drinks. Also, it would seem that the growth of Starbucks has certainly fostered an increased enthusiasm for coffee and coffee drinks in general, and that the smaller shops would certainly benefit from that as well.
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Old 07-07-08, 07:36 AM   #2
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ah, it is expensive.

Sucks for their employees, it just shows you our "so wonderful" economy state...boooooo!
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Old 07-07-08, 09:25 AM   #3
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It really is the End of Days.

Typhoons, hurricanes, earthquakes, Iraq, historic flooding in the midwest...

...and now Starbucks actually CLOSING stores.

I'm going into my bunker now.
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Old 07-07-08, 09:37 AM   #4
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Booerns for coffee!
Hooray for tea!

sucks being a tea fan in a coffee country
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Old 07-07-08, 09:45 AM   #5
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So now I'm going to have to walk two blocks for a Starbucks instead of just one block?

Oversaturation of the market and slavery to the bottom line tends water down the product.


edit to add.... Check out this story from the Chicago Tribune. It's a pretty tidy assessment of how Starbucks lost the plot in the last decade.
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Old 07-07-08, 09:52 AM   #6
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Booerns for coffee!
Hooray for tea!

sucks being a tea fan in a coffee country
Yes, hooray for tea! Unfortunately for me its hard for me to find hot tea that I like other
than what I make at home.
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Old 07-07-08, 10:03 AM   #7
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SB has opened at least ten stores in northwest OKC in the last year. Now they're closing a bunch of stores. Makes me wonder what genius is doing their planning.
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Old 07-07-08, 10:06 AM   #8
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I think its possible that they never had a strategy for knowing when to stop expanding.
They just keep growing, and growing, and all of a sudden they realize they are paying
way too much rent and paychecks and the coffee isn't covering it all.
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Old 07-07-08, 10:20 AM   #9
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Tough economy = No more $3.60 cups of coffee

My wife's friend is a financial planner. When his customers come in to ask what they can do to free up more cash in their portfolio, to cover rising fuel costs, he asks this question first: "Do you drink Starbucks coffee?"

A. (usually) Well, Yeah.

Planner: "Stop doing that. You get free coffee at work, don't you? Drink that."

No lie.

FYI - my wife used to drink 3 Starbucks lattes a day (at $3.60/ea.), which is a little under $11/day. How much fuel can you buy for $11 x 7 = $77/week? 1-2 tanks of gasoline?

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Old 07-07-08, 10:29 AM   #10
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So now there will be slightly fewer places to buy overpriced, overroasted swill and/or the latest Nora Jones album from corporate drones?

Boo frickin hoo.
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Old 07-07-08, 10:30 AM   #11
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Seems like some poor choices were made.

Quote:
Lax Real Estate Decisions Hurt Starbucks
By BRAD STONE
Starbucks wants to get back to its roots to help turn around its ailing fortunes. It brought back the pioneering chief executive Howard Schultz to run the coffee chain day to day, and it has introduced a new blend, Pike Place Roast, that harks back to the location of its first Seattle store.

Yet for all the new marketing efforts, Starbucks’s biggest mistakes and greatest challenges boil down to three words: location, location and location.

This week, in an announcement that surprised even analysts who have grown accustomed to bad news from Starbucks, the company said it would shutter 600 “underperforming stores,” and significantly scale back plans to open new outlets.

The bitter economy is hurting countless retailers and restaurant chains. But the prospect of Starbucks closing stores, rather than opening them, is different. The company has long been known in the world of commercial real estate for its expertise at selecting prime locations and its fearlessness in establishing almost comic ubiquity in some neighborhoods.

Starbucks would not comment for this article. But it appears that the company strayed from the exacting real estate science that it had perfected and guided it through its first expansion wave.

Though the flagging economy and soaring gas prices are responsible for at least some of Starbucks’s woes, interviews with commercial real estate brokers nationwide who work with the chain suggest another aspect of the story. These people say that the company was so determined to meet its growth promises to Wall Street that it relaxed its standards for selecting new store locations.

In some cases, brokers say, Starbucks misjudged the risks of putting stores close to each other, leading to the decline in same-store sales that the company started reporting for the first time in its history this year.

It also overextended itself in certain regions, like in the South and in Southern California, which are among the hardest hit by the housing crisis, and whose older demographics and hot weather are not generally conducive to creating long lines of customers eager to pay $4 for foam-top lattes.

“The economy exposed all the flaws in their thinking,” said one commercial real estate broker, who, like some others interviewed for this article, did not want to be named in order to preserve his relationship with the company.

That “flaws” and “Starbucks” are even in the same sentence when it comes to commercial real estate is a reversal for the company. For much of the last 15 years, Starbucks commercial real estate executives were known for their rigor in selecting locations.

In evaluating locations, Starbucks looked past commonly used community demographic information to analyze nitty-gritty specifics, like the education level in various neighborhoods. It also studied traffic flow on both sides of each street, to make sure drivers could make an easy right turn for their java fix on their way to the office.

“Starbucks rewrote the book on expansion and how to grow multiple store units, really in the world,” said Craig Sweitzer, founder of Urban Works Real Estate in Portland, Ore., who has worked with Starbucks for 18 years. “No one had ever done that before, and now everyone copies them.”

The potential rewards of rapid growth may have led Starbucks astray.

In 2004, the company announced it would double its pace of expansion, with a goal of reaching 15,000 stores in the United States. (It currently operates about 7,000 stores nationally.) That ambitious target was clearly a major culprit in Starbucks’s misfortune: the company said this week that 70 percent of the stores marked for closing were opened after 2006.

Matt Dougherty of Nevada Commercial, which represents Starbucks in Las Vegas, said that the damaging effects of these growth plans were most apparent at the end of each fiscal year, when the company would accelerate store openings to meet the new store goals it had set with Wall Street.

“There was a little bit of a frenzy to get locations open,” Mr. Dougherty said. “The opportunity was there but the real estate wasn’t as good as we would have liked.”

In one recent instance, Starbucks opened a new Las Vegas store with a drive-thru within a mile of an older, successful store with no drive-thru. It was typical Starbucks bravado: dismiss concerns about cannibalization to soak up excess demand and stay ahead of the public’s seemingly limitless craving for caffeine.

But Mr. Dougherty said customers did not change their habits and continued to frequent the old store. “Afterwards, when the new store wasn’t doing so well, we discussed how that probably wasn’t a location we would have approved six months ago,” he said.

Brokers in Florida, another state Starbucks chose for rapid expansion, saw similar trends. Internally, the company was discussing reaching 1,000 stores in the state by the end of the decade, according to two brokers in the state. To get there, it doubled its average number of annual openings. As a result, selection standards for new locations dropped.

“We pumped it up, we accelerated, but when you do that you sacrifice real estate,” said one Florida broker, who did not want to be named. “There was a disconnect somewhere in Seattle between those decisions and what the reality was on the ground. The opportunity was not always there.”

Another problem, according to analysts and brokers, was that many of the newer stores were in areas of potential but unrealized population growth. The housing crisis derailed much of that planned development, in many cases putting the company in the position of waiting for new traffic patterns that never materialized.

“Some of those areas have not panned out as they originally thought because of what has happened economically” said Sharon Zackfia, an analyst at William Blair & Company.

Many analysts also want to see Starbucks slow the growth of its licensed stores, which appear in bookstores and supermarkets and which can siphon traffic from more profitable company-owned locations.

For example, David Palmer, an analyst who covers the company for UBS Equity Research, said that near his home in Westbury, N.Y., there is a company-owned Starbucks within a hundred yards of a Starbucks inside a Barnes & Noble, which in turn is within a few hundred yards of a Starbucks inside a Stop & Shop supermarket.

“We just wonder if shareholders are getting a good deal from that,” Mr. Palmer said.

At the company, there is tacit admission that despite the bad economic conditions that could easily be held accountable, the company had gotten away from its early real estate magic.

When Mr. Schultz returned as chief executive in January, one of his first moves was to bring back Arthur Rubinfeld, who led the company’s expansion from 1992 to 2002 and who helped create many of the real estate techniques for which Starbucks is known.

“They are trying to bring back the old leadership that did everything right,” Mr. Sweitzer said.

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Old 07-07-08, 10:33 AM   #12
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I rarely hit coffee shops, as I also drink tea (ice tea, no sugar [1]), and other than being open 24 hours, most Starbucks are not my idea of a hangout unless its just to sit and chat with someone.

[1]: I absolutely detest sweetened teas. Most are done with corn syrup or some other noxious stuff.
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Old 07-07-08, 10:33 AM   #13
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FYI - my wife used to drink 3 Starbucks lattes a day (at $3.60/ea.), which is a little under $11/day. How much fuel can you buy for $11 x 7 = $77/week? 1-2 tanks of gasoline?
Heh- interesting analogy!
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Old 07-07-08, 10:34 AM   #14
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I'm a fan of "Bucky's"....but I don't go there every day or even once a week. Rather, I see it as a treat to have one of their specialty coffees. I always thought that they oversaturated their store locations. In places like Boston and NY they are literally on every other block.
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Old 07-07-08, 10:36 AM   #15
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*yawn*
I don't go to strawbucks, or any other coffee shop for that matter. I make it at home and at work.
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Old 07-07-08, 10:40 AM   #16
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FYI - my wife used to drink 3 Starbucks lattes a day (at $3.60/ea.), which is a little under $11/day. How much fuel can you buy for $11 x 7 = $77/week? 1-2 tanks of gasoline?
Excellent, thus i don't go to these places. I can make coffee and eat at home just fine and i save some dollares, good simple equation/analogy, too bad people who always complain they ain't got money or broke and go buy this or that unneeded just don't pay attention to their spending.
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Old 07-07-08, 12:00 PM   #17
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I also used to be addicted to Starbucks Mocha Frappachinos. I would get one every morning. Then as I got more concerned with fitness and nutrition I stopped. Now I buy a Bolthouse Perfect Protein Mocha Cappachino drink from the product department. Its so much better for you. You also get 4 servings for 4 bucks. More information about bolthouse... http://www.bolthouse.com/html/cs_mocha_n.html

When I do stop, I like to go to a little shop in waterville ohio. Its called the Coffee Gallery. They have great coffee and let me refill my camelbak! I don't think they would let me do that at starbucks.
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Old 07-07-08, 12:27 PM   #18
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I guess this is good news for me; once you get past a certain age the acid reflux from strong coffee can get quite nasty. You youngsters will learn soon enough.
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Old 07-07-08, 12:32 PM   #19
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They have great coffee and let me refill my camelbak!


Now that's a coffee addiction. Just fill up the backpack and sip it through the dirty straw all day!

Awesome!
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Old 07-07-08, 12:37 PM   #20
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They just opened one up here in Mudville, last week. It's in a strip mall of empty stores. I'm willing to bet it will be one of those facing the business end of the axe.

The kid behind the counter did not know what Earl Gray was.
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Old 07-07-08, 12:39 PM   #21
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I would have not discovered coffee stores or got addicted to the cafe culture without Starbucks bringing it first.

Now that I've found better and less corporate places to drink coffee and relax, I don't need Starbucks as much as I did previously. I still enjoy their Chai, though I have had much better elsewhere, and I still think their coffee is subpar.

Furthermore, I don't really see how their products are all that expensive. I would imagine that getting more than one drink per day there would add up, but my Chai tea costs the same just about anywhere (and anyone who charges less usually makes it worse).

I hope Starbucks stays afloat, so that it can continue to be the "McDonald's" for coffee and let the coffee shop culture stay the way it is.
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Old 07-07-08, 12:42 PM   #22
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I rarely hit coffee shops, as I also drink tea (ice tea, no sugar [1]), and other than being open 24 hours, most Starbucks are not my idea of a hangout unless its just to sit and chat with someone.

[1]: I absolutely detest sweetened teas. Most are done with corn syrup or some other noxious stuff.
Do you have any Peet's near you? They still brew their iced tea the way one would at home - and unsweetened. There is simple syrup availble for those who like it sweetened, as well. It's also really good tea...
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Old 07-07-08, 12:44 PM   #23
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I just feel terrible for the people that have taken pride in their work and now find themselves without a place to work.
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Old 07-07-08, 12:48 PM   #24
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I just feel terrible for the people that have taken pride in their work and now find themselves without a place to work.
So do I.
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Old 07-07-08, 12:50 PM   #25
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I guess this is good news for me; once you get past a certain age the acid reflux from strong coffee can get quite nasty. You youngsters will learn soon enough.
ummm... What age is that? I don't have that problem
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