Re: To Starbucks, a Closing; To Newark, a Trauma, NYTimes, July 23, 2008
Starbucks explains the planned closing of its Broad Street, Newark store very candidly: ““We used several criteria to determine stores for closure, including identifying locations that were not profitable at a store level and not believed to provide acceptable returns in the foreseeable future.” Where's the assessment of the impact of a store closing on the company's reputation, on the Starbucks brand?
Clearly, financial criteria are important to the consideration. Surprisingly, for a business that is so brand driven and profits so much from its investment in its brand, there is no indication that a brand strategy is playing any role in planning the Starbucks retrenchment. To be sure, Mr. Schulz, clothed his comeback in the language of “brand values” and “return to the brand’s roots”. But, where's the meat? In fact, no brand planning has surfaced as of today. Instead, Starbucks is cannibalizing its brand and sacrificing it on the altar of satisfying the financial goals imposed by Wall Street.
Some very smart person once said, “it’s not whether you fail but how you deal with your failure that reveals who you are.” And that’s true of brands as well. These times will reveal much about Starbucks and will set the foundation for its future success or failure.
Starbucks sold itself as a “different” type of coffee company. It was the American adaptation of the European coffee house, the neighborhood coffee house. People friendly, the café’s were stocked with newspapers and periodicals and invited customers to linger while enjoying their quality coffee time. It was also a company that was good to its people: good salaries, advancement possibilities, good ingredients in its foods, good coffee purchased from the right parts of the world. Starbucks was a trend-setter which “proved” during its rise that you can be a good corporate citizen as well as a highly successfully company. These were some of its hard earned brand equities.
People felt good when they sipped their Starbucks; they were part of a good thing. Who can measure how much of the premium they knowingly paid for their Starbucks was for the better roast, or coffee bean and how much for the privilege of participating in this "good", "positive" feeling.
It’s now clear that in its giddy days, the Company embraced some ridiculous expansion policies. It played to its financial analyst audience and has paid the price in hits to its profits caused by foolishly chosen, duplicative locations and other wasteful expenditures.
But while claiming to be focused squarely on the protection of its base, its core, its brand, its current tactics reveal a serious misunderstanding of what the Starbucks brand is all about. Ignore the people on Newark’s Broad Street, if you like; what are the rest of Starbucks followers going to think when their “different” kind of company turns its back on the community development it once prided itself as being part of? What is the next local zoning board going to think when Starbucks needs a variance to successfully replace the old, local coffee shop with a brand new Starbucks café? How much of a premium will coffee drinkers pay for a cup of coffee from a regular corporate coffee shop?
How much is a company’s credibility worth? Well if you leave it exclusively to the numbers crunchers tasked with reducing costs by a target percentage within a specified time frame, “not much”. There may not be a line item in the company’s financial statement for “brand equity” but intelligent, forward looking leaders of brand driven companies surely understand its value.
How about you, Mr. Schulz?
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