Tag Archives: Starbucks

Starbucks tried to be a third place

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A look at Starbucks’ rise and fall includes some commentary on its wish to become a “third place” in the United States:

This was the vision that former CEO Howard Schultz had long chased: bringing Italian-style coffeehouses to the U.S. and transforming them into a ubiquitous “third place” for Americans. The concept of a third place is simple: If the home is the first place, and work is the second place, a third place would serve as an anchor of community life and social interaction, a spot where anyone could see familiar faces and meet new people in a comfortable, unpretentious setting…

But as the company grew, marketing its locations as a tableau in which to “stay awhile” ultimately meant there was a finite number of people they could sell coffee to per day. As it became clear people were willing to pop in for a $9 handcrafted drink and leave, Starbucks turned away from the original vision, instead hoping to bump profits by enticing a larger number of customers who wanted their coffees to go. The store rolled out mobile ordering, pickup-only store formats with no seating, and an ever-growing rewards program that offered a disappearing carousel of coupons and freebies, all in an effort to expand the number of sales that it could theoretically make in a day…

Starbucks is largely credited with pioneering the world of mobile ordering and building an ecosystem of rewards that keeps the consumer loyal to the brand. “That definitely took off, and then the third place dwindled away during the pandemic,” said Ari Felhandler, a financial analyst who specializes in the food and beverage industry at the firm Morningstar…

And now, Starbucks is staring down the barrel of an increasingly crowded market. Longtime competitors like Dunkin’ Donuts, Peet’s Coffee, and Panera Bread all started their rewards programs after Starbucks launched its app, creating more camps for customers to pledge their loyalty to. There are also the rising coffee newcomers, like San Francisco’s Blue Bottle Coffee and private equity–backed Blank Street Coffee, which also offer a large menu of specialty espresso drinks at their locations alongside their own membership programs and sleek storefronts. Other major corporations including Capital One have also made a bid to become the preferred third place; they boast arching windows at their locations, which combine your local bank with a coffee shop, and have half-off deals on all food and drink for cardholders. (The company has even partnered with California’s Verve Coffee Roasters for its espresso beans.)

Starbucks is all over the place. Its locations offer predictability and standardization. It is McDonaldized coffee and a McDonaldized experience for the early 21st century.

Starbucks’ best claim to being a third place might be that alternatives are lacking for Americans. Should they gather in fast food restaurants? Bars? A range of coffee drinks and food items appeals to a broad set of people. There are many locations. The brand still has some cachet.

What if Americans don’t really want third places? A third place is intended to be a setting for people to talk and interact outside of work and home. People want what Starbucks sells but they often want it for their car trip or to consume elsewhere. Who has time to sit and drink a coffee and talk to another person? Who wants to do this?

Perhaps we should instead hope for places where people want to spend time with their phones. They can take an interesting selfie. They can catch up with social media activity. The seating and the lighting is good for looking at a screen. Their interactions with others are mediated through screens. As people do this, they can drink a coffee. Our smartphones can be our companions on the go.

Starbucks as a symbol of neighborhood or community success, closing locations edition

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Starbucks recently announced they will close some locations:

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While Starbucks has yet to disclose the total number of closings or the specific locations, Niccol said in his open letter that the company would end the fiscal year with nearly 18,300 stores in North America, which is down from 18,734 at the end of the third quarter, according to financial filings.

This is national news but it also has local ramifications. For several decades, having a Starbucks in a neighborhood or community signals some level of local success. Starbucks does not locate just anywhere – even with over 18,000 locations in North America – and each location hints at the potential local customers who purchase coffee and other goods. And closing locations also involves local jobs.

Workers rallied Thursday at the Starbuck’s store at Clark Street and Ridge Avenue in Chicago’s Edgewater neighborhood, one of the locations targeted for closure, according to the union. The store is set to work its coffee grinders and espresso machines for the last time Saturday…

On a crisp and sunny fall Saturday morning, a few customers filtered into the Glencoe Starbucks to get their last coffee at their local shop, and to say their goodbyes to the baristas. The store was set to close for good that evening. The store employees will find out Sunday if they’ve been transferred to another store or laid off, a barista said while whipping up a coffee.

Even as the number of store closings appears to be relatively small – perhaps several hundred out of more than 18,000 – it will be interesting to see how local communities are affected. If a Starbucks closes in a city neighborhood or in a suburb, does this then mean a loss of status or hint at decline? Some of this might depend on what goes into where the Starbucks was located. Will another national chain move in? Could a local business fill the gap? Will whatever ends up there provide the same status and tax revenue?

On the other hand, some people have concerns about Starbucks. It is a national brand and some prefer to see local businesses do well. Starbucks can be viewed as part of gentrification, changes to communities that displace long-term residents in favor of new residents with more resources and new expectations. A closed Starbucks presents a new opportunity.

Five or ten years from now, following up on these closed locations could provide a look at the brand and communities. Where are they expanding, where are they leaving? If they continue to move to drive-thru locations, how does this affect places?

Starbucks moved away from being a third place, emphasized drive thru and mobile orders

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Is Starbucks no longer a gathering place?

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The idea of Starbucks as a third place became part of its corporate mythology. Starbucks aimed to create a welcoming environment for coffee drinkers and employees with comfortable seating, jazz music and the aroma of freshly-brewed coffee. Employees who brewed and served Starbucks coffee, whom Starbucks called baristas, handwrote customers’ names on their drink orders…

Mobile app and drive-thru orders make up more than 70% of Starbucks’ sales at its approximately 9,500 company-operated stores in the United States. In some stores, customers complained online that Starbucks pulled out comfortable chairs and replaced them with hard wooden stools. Starbucks has also built pickup-only stores without seating. Machines that print customers’ names have replaced baristas’ handwriting on cups.

“Third place is a broader definition,” current Starbucks CEO Laxman Narasimhan said last year. The “classic definition of third place — it’s a box where I go to meet someone — it’s frankly not relevant anymore in this context.”…

Starbucks’ changes to its sit-down business model came in response to several trends — demand from customers for ordering coffee from their cars in drive-thru lanes or on their smartphones. The shift from a business serving hot coffee to one in which cold coffees, teas and lemonades make up more than half of sales. The Covid-19 pandemic, which forced cafes to shut indoor seating.

Starbucks shifted to meet Wall Street’s demands, too. Starbucks found it could reduce labor costs and increase order volume by running a mostly drive-thru and take-away coffee business. Starbucks also found difficulties with being America’s third place and did not want to become the public space and bathroom for everyone, including people coming into stores who were homeless or struggling with mental health challenges on city streets. Starbucks has closed some stores and restricted bathroom access over safety concerns.

The shifts make sense: more consumers want quick service and coffee to go, the company and shareholders want to make more money, and serving the public can be difficult.

But this is a different approach to coffee, food, and places more generally. Getting coffee to consumers as cheaply and quickly as possible and when and where they desire it treats place differently. Arguably, you might not even need a location any longer. Can we get Starbucks via drones or by drivers within ten minutes of an order? Why bother going to a location at all? Why not have a huge centralized Starbucks that sends out drinks at light speed in all directions?

The purpose of third places is less about consumption and more about social interaction and conversation. Yes, third places like cafes and pubs have food. But the food helps people talk and relax. All humans need to eat – and they also need social connections. Having a refresher in the car while driving – often a solo experience – is a different experience than sitting with friends for half an hour near other people.

Starbucks is not alone in this. McDonald’s is a gathering place for some. But if coffee and fast food places limit seating and primarily want to serve people who do not stay, where can or will people go? Maybe nowhere else. Perhaps this helps give momentum to sociologist Eric Klinenberg’s argument that public schools and libraries should be designed in ways that encourage social interaction.

The value of highlighting Starbucks, since 1971

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In a Starbucks TV commercial, I noticed the company notes it was founded in 1971. Here is a logo from their website that highlights 50 years of business:

Starbucks.com

The company’s website highlights their heritage:

Our story begins in 1971 along the cobblestone streets of Seattle’s historic Pike Place Market. It was here where Starbucks opened its first store, offering fresh-roasted coffee beans, tea and spices from around the world for our customers to take home. Our name was inspired by the classic tale, “Moby-Dick,” evoking the seafaring tradition of the early coffee traders.

Ten years later, a young New Yorker named Howard Schultz would walk through these doors and become captivated with Starbucks coffee from his first sip. After joining the company in 1982, a different cobblestone road would lead him to another discovery. It was on a trip to Milan in 1983 that Howard first experienced Italy’s coffeehouses, and he returned to Seattle inspired to bring the warmth and artistry of its coffee culture to Starbucks. By 1987, we swapped our brown aprons for green ones and embarked on our next chapter as a coffeehouse.

Starbucks would soon expand to Chicago and Vancouver, Canada and then on to California, Washington, D.C. and New York. By 1996, we would cross the Pacific to open our first store in Japan, followed by Europe in 1998 and China in 1999. Over the next two decades, we would grow to welcome millions of customers each week and become a part of the fabric of tens of thousands of neighborhoods all around the world. In everything we do, we are always dedicated to Our Mission: to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time

Fifty years is likely a safe point to highlight a founding date as it is a nice round number, a half century. Sure, 49 or 51 years gets at the same idea but it does not have the gravity of 50. Yet, I could imagine two sides to whether promoting this date is helpful.

On one side, fifty years is a long time. Many businesses do not make it this far. Even fewer companies are so long for so many years. Highlighting the date implies permanence, tradition, stability. Starbucks is not just a passing trend; they are good at what they do, they have been around five decades, and hope to be around for many more.

On the other side, Americans tend to like upstarts and novelty. Does fifty years imply old age and lack of innovation? Starbucks is established while other successful companies are offering new models and products. There are Starbucks locations everywhere but once companies like Sears or Woolworths also thrived.

Even as the company celebrates 50 years, companies are not permanent. Perhaps there is a time when fast food in general no longer exists or people can get similar food products at home. Or, Starbucks does something internally that causes issues. Or who knows what. Does it reach 75 years or 100 years, other round milestones worth celebrating? It is hard to know now; Starbucks will keep going until it doesn’t.

When America’s unofficial third place closes 400 locations

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If Starbucks is an important third place for Americans to gather and interact, what happens when the company closes 400 stores because of COVID-19 and to focus more on drive-through and carry-out business?

business cafe coffee dark

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Starbucks announced on Wednesday that it will close 400 of its roughly 10,000 locations in the U.S. and Canada over the next 18 months as the company projects to lose up to $3.2 billion in sales this quarter due to the ongoing coronavirus pandemic. It’s not exactly a retrenchment. The company plans to end this year with 300 more stores than when it started, even accounting for the closures—but that’s half of what the chain had originally been planning. About 40 to 50 of the new locations will only offer pickup or drive-through.

Starbucks typically closes about 100 stores every year due to leases expiring and market conditions. The decision to up that number signals that Starbucks expects the recovery from the current recession to extend far into the new year. The company did not list which locations it plans to shutter, though it did say that they would be in “high-social gathering locations” like campuses and malls. Shares for the company fell by 4 percent in midday trading as the news broke. “As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers,” Starbucks CEO Kevin Johnson said in a press release.

While nearly all of the company’s cafés have reopened in limited capacities without in-store seating, the twin health and economic crises continue to discourage consumers from spending and venturing out to public spaces. The shock to Starbuck’s business model has reportedly accelerated its shift to focusing on takeaway service, which it had already been planning to do before the pandemic. In November, the company opened its first Starbucks Pickup store at Penn Plaza in New York City, where customers order and pay through their phones. While Starbucks locations have long served as a “third place” where people could meet and relax, customers in recent years have been placing more and more orders for takeout, perhaps due to the company’s recent focus on mobile ordering. The company estimates that 80 percent of its orders at company-owned stores in the U.S. are to-go. Now that the virus has made people even less likely to dawdle at cafés for an extended period of time, Starbucks expects that percentage to rise.

The new stores will emphasize the use of Starbucks’ ordering app, Uber Eats, walk-up windows, and curbside pickup to facilitate social distancing. Some store layouts will also begin including pickup counters that exclusively cater to mobile orders and food delivery services. The company hopes that large U.S. cities will eventually host a mix of cafés and pickup locations that are located within walking distance of one another in order to reduce crowding.

For a long time, the presence of a Starbucks has denoted a particular status for an area or community. Will the loss of a Starbucks or even the shift from a place one can sit and gather to one that sends food and drinks out the doors and windows harm communities?

Even without COVID-19, this hints at the limited public realm Americans have where fast-food places are some of the popular places people can or will gather. Starbucks presented this possibility though as a private business they still aim to make money and will restrict certain behavior. As the article notes, this shift may have already been underway; I noted the busy Starbucks drive-through early this year on a rare work session at a local store.

Welcome in Amazon, look for other businesses to follow?

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Amazon will soon open a new facility in Palatine, Illinois and get a tax break to do so. That is normal. This other part caught my attention: the suburb hopes Amazon’s arrival helps spur more development.

Amazon will move into a warehouse and distribution facility under construction off Hicks Road south of Northwest Highway, and Palatine officials hope the online retail giant’s arrival sparks more development in that industrial area.

“This is a good bit of news for us, for sure,” Mayor Jim Schwantz said Monday. “It’s the right kind of use for that area. It’s a light draw on our services. It’s not going to take a ton of water. It’s not going to take police or fire calls. We know Hicks Road is built to be able to handle the additional traffic.”

Lots of communities want Amazon to move in. They bring jobs, they fill warehouses, and they bring a big name. Just remember all the cities that put together plans to try to allure Amazon HQ#2.

But, this is another dimension of having a successful company move into your community: it could lead to further growth. Having Amazon puts you on the map. Companies could choose from dozens of warehouse or manufacturing locations in the Chicago region. But, if Amazon is already there, this may attract other firms. Success begets success, growth leads to more growth.

Another example, perhaps two decades in the making: suburbs and neighborhoods all wanted a Starbucks. Not only would this bring in sales tax revenue and more shoppers. It put a place on the map. It suggested the place was cool enough, was up and coming or had an established set of well-off residents. Starbucks could pave the way for other similar businesses that would bring in or provide for a certain crowd.

Or, think about headquarters. These facilities may not have that many employees or may just be an office building but being home to headquarters, as opposed to branches or locations, is something special. Headquarters attract headquarters. They signal something.

A typical Amazon facility is not going to be flashy. It is not going to attract many visitors or shoppers. However, it will add to a community’s tax base, provide jobs, and help the community say they are home to one of the most important companies in America. That Amazon distribution center may be the start to something greater.

Can Starbucks be a third place when its drive-through is so full?

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Starbucks aspires to be a third place, a setting where people of different backgrounds can gather in between home and work. Coffee shops, and restaurants more broadly, can play this role as people need to eat and drink and such activity is often tied to social interaction.

In my morning commute, I pass a Starbucks in front of a strip mall and right next to a busy suburban road. The drive-through line is always very full. The size of the line is particularly noticeable in this location because once the Starbucks line has more than eight cars, it spills over into the roadway through the shopping center and can block traffic.

The inside of this location is attractive. A month ago, I spent a morning working there. The store had dark walls and what looked like a tin ceiling plus a variety of seating options (tables, upholstered chairs, work counters). A steady flow of people came in and out and there were at least a few others like me hunkered down for several hours doing work. From my working location inside, all morning I could see the steady flow of people going through the drive-through.

Can a coffee shop or any restaurant so dependent on drive-through traffic for business (think McDonald’s) truly be a gathering spot, a social space, a third place? Perhaps the issue is much bigger than Starbucks:

1. Businesses do need to make money. Starbucks has encountered this problem before with people and visitors who might restrict or limit sales. Not having a drive-through is a bold statement but might not be financially viable (or might not generate the kind of revenue Starbucks desires).

2. The suburbs require driving (and many Americans seem to like it this way). Starbucks locations in denser settings do not have drive-throughs and perhaps they can better function as third places.

3. American fast food combines the ability to drive and getting food quickly. Without a drive-through, Starbucks is both missing out on business and putting itself into a different category of place.

4. Americans in general may not like third places given their preferences for single-family homes and private dwellings alongside their devotion to work. Any business or restaurant trying to fight against this may not make much progress. Even if people come to Starbucks or similar locations, how many engage with the people around them as opposed to focusing on their own work or interacting with a companion who came with them or who met they there? Public spaces where people come together are rare.

Maybe Starbucks can only be a third place in a certain kind of location with denser populations and less reliance on cars. Or, perhaps Starbucks can never really be a third place in a society dominated by driving and quick food.

Starbucks as a symbol of wealth in a community

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Starbucks is planning more stores in less wealthy neighborhoods:

Starbucks plans to open or remodel 85 stores by 2025 in rural and urban communities across the U.S. Each store will hire local staff, including construction crews and artists, and will have community event spaces. The company will also work with local United Way chapters to develop programs at each shop, such as youth job training classes and mentoring…

Starbucks opened its first community store in Ferguson, Missouri, in 2016, two years after the riots that broke out over the shooting of an unarmed black 18-year-old by a white police officer. It has added 13 more locations since then, including stores in Baltimore, Chicago, Dallas, New Orleans and Jonesboro, Georgia. Another one will open this spring in Prince George’s County, Maryland. Starbucks estimates the shops have created more than 300 jobs…

Kelly said the stores reflect Starbucks’ core belief in responsible capitalism. The coffee shops are profitable, he said, and have the same menu as regular Starbucks stores…

“I can’t think either of a retailer, especially one that has more of a discretionary, higher-end purchase, being willing to push into neighborhoods and markets that have less purchasing power,” Theodos said. “Starbucks usually appears when a neighborhood has the purchasing power to support it.”

For years, Starbucks has been a brand and presence that signals a wealthier location. With their prices, products, and aesthetics, communities had to have a certain level of resources for Starbucks to locate there. Once the money was there, Starbucks might arrive in droves. (I’m thinking of the number of Starbucks on Michigan Avenue in Chicago.) If payday loan stores and dollar stores help identify poorer locations, Starbucks may be the most common restaurant that signals the opposite.

I am curious about one item of information from the article. The Starbucks executive quoted in the story says the locations are profitable. Does this mean Starbucks avoided these locations for so long even though they could have made money or did something change in the cost equation over time? Some firms would want to expand everywhere to bring in money though others might want to protect their status.

Naperville has 11 Starbucks locations

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The recent move of the downtown Naperville Starbucks to a larger location led to a quick mention of the numbers of Starbucks’ location in the suburb:

A favorite place to stop for coffee is on the go in Naperville as two of the 11 Starbucks stores in the city are preparing to move.

Naperville has collected many accolades over the last two decades (see earlier posts here, here, and here) and this may be another one: having this many Starbucks suggests the community has a certain level of wealth and quality of life. Certain businesses can set a community apart and many suburbs would love to have multiple Starbucks not just for the money they generate (think of the drip, drip, drip of sales tax revenues) but for the prestige they confer.

Here are the locations according to Google Maps:

StarbucksNaperville

Not surprisingly, the majority are located along major transportation corridors: Route 59, Ogden Avenue, and 75th Street.

Is Starbucks really a “third place”?

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Starbucks CEO Howard Schultz likes to claim his stores operate as “third places,” a term coined by sociologist Ray Oldenburg. But, do they really fill this role?

Now that so many street corners seem to have a Starbucks, has the international chain truly become that “place on the corner” where people connect? In fact, Oldenburg dismisses the Starbucks coffee shop as an “imitation”, debilitated by the company’s pursuit of that other quintessentially American obsession, security, and the sterile, predictable environment it produces. “With its overriding concern for safety,” Oldenburg told Bryant Simon, author of Everything But the Coffee: Learning about America from Starbucks, “it can’t achieve the kind of connections I had in mind.”

Walk into a Starbucks today, and you may not notice much connection going on: some customers come in chatty groups, but many others arrive in search of nothing more than a place to open their laptops and get some work done; in effect, using Starbucks not as a third but a second place — their workplace. Most simply grab their coffee and go, never pausing to avail themselves of the chairs and couches provided, while others prefer to keep human interaction to an absolute minimum by using the drive-through window, a resoundingly un-urban feature Starbucks introduced in 1994.

Starbucks’ ongoing retooling and experimentation suggests that Schultz, for all he talks about his company’s resurrection of the “third place”, has yet to hear a sufficient amount of political banter and schoolchildren’s chatter in his stores. Starbucks’ enormous scale and need to service the American demand for frictionless convenience contradicts its mission to replicate the appeal of continental coffee-house culture: how much of a neighbourhood-rooted venue for chance encounter can you provide when you have to run thousands and thousands of them, making sure they all do more-or-less the same thing?

Maybe you could make a case either way. In favor, coffee shops serve as third places in numerous cultures and their presence almost everywhere means Americans have a common place outside their private homes and workplaces to get together. Yet, Starbucks present a common “McDonaldized” experience (it may be coffee but it is still fast food and often dependent on a car-driven society) that is primarily controlled by corporate interests. Perhaps only in a society that is so privatized (emphasis on single-family homes, cars, moving away from urban problems, individualism, etc.) could a chain coffee store even make the case that it is about community.