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Editorial Echoes: 31 July 2008: Will Starbucks Ever Learn?

July 31st, 2008 at 07:58pm

I apologise for the delay in getting this online, it was recorded just before midday, but people with too much to do and a body clock which is stuck in a timezone eight hours ahead of the local timezone tend to need to sleep at odd hours.

Starbucks are closing nearly three quarters of their Australian operation, and yet Starbucks management don’t seem to have noticed an underlying problem as Samuel explains.

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The script follows.

Samuel

Welcome to Editorial Echoes for Thursday the 31st of July 2008, I’m Samuel Gordon-Stewart.

A couple days ago, Starbucks Coffee decided to close almost three quarters of their stores in Australia. 61 of their 84 stores. Now, it’s no secret that the Starbucks company is in trouble, it’s not all that long ago that they decided to close a whopping 600 stores across the United States, and now another thousand non-store jobs in the US are going as well.

The standard line about the stores which are closing, both in the US and here, is that they are underperforming…got that, underperforming. But how can they be underperforming when the stores to be closed in Australia include Martin Place in Sydney, Queen Street and Collins Street in Melbourne as well as Melbourne Airport? These are places with an extraordinary amount of foot traffic…if a business which sells something popular (in this case a popular beverage) to anybody who walks in and plonks a few dollars on the counter can’t survive in places like the ones I mentioned, then surely it says something about the business itself.

Perhaps Red Symons summed it up in a broadcast on his 774 ABC Melbourne breakfast show when, in an effort to comply with ABC Editorial Policy by not mentioning the Starbucks name, he referred to them as:
[insert: Red Symons: “the coffee that none of us buy cause we’re all appalled by the fact that they have all these ridiculous flavours”]

OK, well there might be more to it than that, but it’s a start. Personally, I’m happy to be rid of Starbucks in Canberra. Their four stores, or “locations” as they would prefer to have us call them, Gungahlin, Brand Depot, Canberra Centre and City Walk, are all going, and not a moment too soon in my view.

The last time I entered a Starbucks was in April 2005 when a person I was meeting insisted on meeting there. The person was late, so I ordered a coffee and a slice of something, either a cake or an apple slice. I have personally made coffee with a teabag in it which tasted better than the coffee I endured there, and the food, well for something which was supposed to be sweet…let’s just say that the people who cook food for them either don’t eat their own cooking, or don’t have tastebuds.

In some places, I could probably have just written it off as a bad experience and let it be, but the prices in this place were extraordinary…you could be forgiven for thinking that a bank were running the place. It’s clear that the prices were a premium rate, but it obviously wasn’t due to the quality of their product, rather it was due to their brand name. It almost defies logic that anybody would repeatedly pay high prices for a product like that, but they did, but obviously in ever-dwindling numbers.

It reminds me slightly of the Yes Prime Minister episode where Sir Humphrey says that nobody in the general public knows how the missile defence system named “Trident” works, all that they know is that it costs fifteen billion pounds and therefore it must be wonderful. Perhaps Starbucks were running on the same premise…our coffee costs an exorbidant amount, therefore it must be wonderful…and perhaps regular customers deluded themselves into thinking that by being a regular customer, people would think of them (the customer that is) as wonderful too.

Clearly, as evidenced by the mass exodus of Starbucks stores, it’s a business model which just doesn’t work. It did for a while, but people aren’t stupid, and you can’t pull the wool over their eyes forever. Perhaps Starbucks have learnt their lesson and will reinvent themselves with a better product at a more reasonable price, or perhaps they still believe that they have a workable business model…unfortunately their website makes me believe that the latter is the case, as their plan to, quote “restructure [their] business in Australia through a geographical refocus on three core cities and surrounding areas” doesn’t sound like a business which has learnt anything to me.

The one thing which I find myself hoping comes out of this is a bunch of good staff finding employment elsewhere. At the very least Starbucks have vowed to pay out the full entitlements of their staff, and I have to say that the staff were the only good thing about my visit to Starbucks. The hospitality industry is always looking for more staff, and it looks like a whole heap of good, friendly, enthusiastic staff have hit the job market.

To them, I wish the best of luck. To the people running the Starbucks company, I do hope that you learn to adapt quickly, because your new direction is just a small version of your old direction, and as they say, only a fool does the same thing twice and expects a different outcome.

I’m Samuel Gordon-Stewart and this has been Editorial Echoes. If you would like to respond, please send me an email, echoes@samuelgordonstewart.com. Until next time, tada.

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