Starbucks’ Cup Now Runneth Under

Written by Evan Schuman
November 15th, 2007

When Starbucks this week reported—for the first time in years—that the number of customers visiting it’s stores had dropped, the coffee reseller announced plans to send more managers into the field. Company officials pointed to recent price increases (because of milk price hikes) and denied store saturation.

But there’s something else going on here. Starbucks has been retail’s best example of a company that truly understands social networking and how to make a retail outlet a destination. Starbuck’s prices are quite high for coffee and other independent coffee shops—and even some chains, such as McDonald’s and Dunkin’ Donuts—offer what some consider to be better tasting coffee.

But consumer choose to go to Starbucks to meet with friends, do business meetings and sometimes just hang out. More unexpected: the chain that has so skillfully mastered social networking has a Web site that is fine, but not great. It has virtually no community section and it goes out of its way to not promote what it has.

This is a company that has decidedly made the Web a very low priority. Could Starbucks be learning that man doesn’t live by bricks alone? That a well-crafted Web presence doesn’t merely generate pageviews and generate a little E-Commerce revenue. (The chain does permit consumers to purchase their coffee making equipment online. How touching.)

An intelligent Web strategy uses the site to generate excitement and to send more people to the store, where they start discussions that they can continue online. Integrated, it allows community building locally and globally. On their own, though, the stores will eventually lose their buzz and traffic will drop off.

Starbucks CEO Jim Donald is quoted in Friday’s Wall Street Journal as saying that Starbucks has decided to open 100 fewer stores next year than it has projected this fall because the chain is "taking a little more deliberate approach." Perhaps had they taken a more strategic approach with its Web approach, this more deliberate approach—a deliberate retreat—might not have been necessary.


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