retail news in context, analysis with attitude

The Wall Street Journal writes about how Starbucks is examining virtually every element of its operations - from employee relations to product formulation - as it looks to reclaim its preeminence in the zeitgeist.

An excerpt:

"Starbucks, the chain that made espresso ubiquitous in America, now faces daily crises in dispensing it. U.S. stores designed a decade ago struggle to meet today’s consumer demand. Cafes that once averaged 1,200 orders a day are now trying to make 1,500. Executives recently visited one East Coast cafe that averaged $1 million in annual sales a decade ago. Now, it is ringing up nearly $3 million in sales in the same 1,500-square-foot space.

"Many U.S. locations need to be overhauled, said Katie Young, who as senior vice president of global growth and development is in charge of figuring out what new cafes should look like. Having so much demand is a privilege for Starbucks, but also a problem, she said.

"Starbucks was hit hard by the pandemic. By last year, to-go orders had helped sales recover to prepandemic levels, but this year, rising costs have begun eating into profit margins, and the company has raised prices. In the quarter ended July 3, Starbucks reported that sales had risen 9% from the year-earlier period, but net income dropped 21%.

"Executives also are grappling with a unionization push that began in its Buffalo, N.Y., market in August 2021. Workers have been pressing for better pay, staffing levels and hours. Turnover has shot up since the pandemic hit. One in four U.S. baristas are quitting their jobs within 90 days, according to internal figures, up from roughly one in 10 previously."

KC's View:

Starbucks can be seen as a poster child for the phenomenon of getting so complacent with one's business model that leadership does not really see the degree to which the business has evolved, eventually becoming so out of touch with reality that it begins to lose relevance.

A retailer friend of mine yesterday pointed out that two of the most dangerous words for any retailer are these:  Apathy and Atrophy.  I think he's right, and that Starbucks suffered from both.  (We won't engage in an extended discussion of whether Howard Schultz, who has returned as CEO and is positioning himself as a savior of the company's legacy, share in the complicity for the crises that the company faces.)

Having stores that are built to be third-places serving hot drinks, but actually are doing more take-out business and serving more cold drinks, is a perfect example of the kind of problems that every retailers has to work to avoid.

Starbucks is right to put every policy and presumption on the table, challenging every part of the business and starting to separate core values from the stuff that just has dust on it.  "We've always done it that way" is a phrase that has to be banned from Starbucks' internal vocabulary.