retail news in context, analysis with attitude

MNB took note yesterday of a Fortune report that Starbucks is editing the assortment of products available in its stores, with a goal of eliminating as many as 200 from a standard store, or almost one-third of the merchandise.”

I commented, in part:

More and more, there is little excuse for stocking products that does not drive traffic, sales, and/or profits. There simply is too much data available. Plus, Starbucks seem to be having a moment where it needs to drive out inefficiencies, and this is what you call low-hanging fruit.

MNB reader Monte Stowell wrote:

Starbucks is doing the right thing by their reducing the number of SKUs they carry. SKU proliferation in most retail channels is an issue that all major grocery and drug channels should address. FYI, I refer to one category that I find that could be trimmed. That is the toothpaste category. Many years ago, the toothpaste category had about 20 or so SKUs with 4 or 5 brands. Today, you look at the toothpaste category and you will find 7-8 brands and about 90-100 SKUs. Colgate and Crest are the two brands that have all kinds of descriptions on their SKUs. If you turn the tubes over and read the ingredients, there is very little difference in the order of ingredients, but they make the consumer believe that one SKU is better than the other. They all have fluoride, and they will all help to clean our teeth and prevent decay.

I would suggest that retailers look at all categories, and you would find the same issue as it relates to ingredients and package sizes. Add all these duplicate SKUs up and look at all the costs to order incurred in the supply chain process, the costs are absurd. It is much better for the retailer to make money on the sell rather on the buy.

Another MNB reader wrote:

They are starting to find out that $4 cups of coffee, no decaf, and slow lines, are now starting to annoy people, who can get just as good coffee from McDonalds, DD, local shops, everyday all day!! Another Company not understanding they need everyone to support a business, not just a chosen few!

Let me take issue with a couple of these observations.

First, your comment on slow lines. You are ignoring the fact that Starbucks’ mobile ordering system has eliminated a lot of lines. But you’re also ignoring the fact that if the lines are long, it isn’t because people have stopped going to Starbucks.

Second, my experience with McDonald’s coffee has not been good.

But mostly, I would argue with your comment that Starbucks is just another company “not understanding they need everyone to support a business, not just a chosen few.” While Starbucks hardly is a niche business, it doesn’t need everyone. Starbucks has long been very specific about its goal to democratize the better coffee experience, but it never has been the kind of price play that would seek to attract everyone. Now, that leaves it vulnerable during downturns; I’ve long argued that its moves upscale will create problems for the company when the next recession comes, as it inevitably and eventually will.

But I think you make the mistake of assuming that because you don’t like Starbucks or are offended by it, the business model must not make sense. There are a lot of places where I would never eat or drink, but I try not to conflate that with being a legitimate and sustainable business.

Then again, maybe I just think that because I am one of the chosen few.
KC's View: