Monday, December 31, 2007

Unconvential Marketing Wisdom

Slate has an interesting article up about how Starbucks can actually improve the business of local Mom & Pop coffee houses. If you think about the role of Starbucks in coffee-culture at all, you probably think that the opening of a Starbucks means the closing of a local, independently owned java-joint. And this does certainly happen, but...

But closures like this have been the exception, not the rule. In its predatory store placement strategy, Starbucks has been about as lethal a killer as a fluffy bunny rabbit. Business for independently owned coffee shops has been nothing less than exceptional as of late. Here's a statistic that might be surprising, given the omnipresence of the Starbucks empire: According to recent figures from the Specialty Coffee Association of America, 57 percent of the nation's coffeehouses are still mom and pops. Just over the five-year period from 2000 to 2005—long after Starbucks supposedly obliterated indie cafes—the number of mom and pops grew 40 percent, from 9,800 to nearly 14,000 coffeehouses. (Starbucks, I might add, tripled in size over that same time period. Good times all around.) So much for the sharp decline in locally owned coffee shops. And prepare yourself for some bona fide solid investment advice: The failure rate for new coffeehouses is a mere 10 percent, according to the market research firm Mintel, which means the vast majority of cafes stay afloat no matter where Starbucks drops its stores. Compare that to the restaurant business, where failure is the norm.

I've seen some of this myself, in the Mid-West and deep South, where until the early to mid 90s (the time of Starbucks initial explosion) coffee shops of any kind besides the neighborhood diner were virtually nonexistent, now there are coffee shops, both local and corporate in every decent sized community. Heck, whereas once you could only get some tepid, rusty-colored dishwater at your local convenience store, now every gas station in the country has a variety of coffee flavors at your disposal. If anything, Starbucks has single handedly introduced the country to the concept that coffee can be more than the swill you are used to getting at Dennys, (actually since Starbucks ascension, even Dennys' perennially despised brew has improved significantly.) For reasons beyond those mentioned in the article, this has benefited those local businesses who make a great cup o' joe.

This is actually a discussion I've had with several people over the years, including one today. I've heard it expressed that McDonalds' omnipresence in the world is a sign of American cultural dominance. An American tourist, no matter where they are in the world, knows that they can go to a McDonalds and receive a burger which, while it may not be the best in the world, will be just what they expect. A kind of colonialistic, imperialistic comfort food. I think Starbucks represents the same sort of thing but for the caffinated elite from the Pacific NW, who came to the forefront of our economics at the same time as Starbucks. Even though you know that it won't be the best No Caff, Soy Latte you ever had, it WILL be a No Caff Soy Latte. And that's reassuring on some level.
But still, if faced with a choice, any good Pacific North Westerner knows that Starbucks is not Seattle's Best Coffee.
Which brings my thinking back to McDonalds. I've heard it said that McDonalds spends millions of dollars analyzing markets and traffic patterns before opening a new store. Wendy's, on the other hand, just tries to find a new location near where a new McDonalds is...

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