Starbucks Losing "Core Fan Base" and Sinking

Starbucks has some good values but trying to grow too fast and make too much money has yet again dehumanized the customer experience of a company and caused customers to walk away. That's sad. (I thank Bob Lefsetz and his email newsletter for bringing this to my attention.) This confirms the lessons of my former post on Giant Corporations.

Here are some highlights from yesterday's New York Times article that describes what happened:

* After more than a decade of sensational buzz, Starbucks is struggling nationwide as it faces slowing sales growth and increased competition.

* The man who built the chain, Howard D. Schultz, has retaken the reins in an effort to revive it.

* Mr. Schultz has said he wants to refocus on the “customer experience,” recapturing some of the magic of the chain’s early years, when employees...made the drinks by hand and customers were excited by top-notch coffee...

* "For [Starbucks], the move to fully automated machines was inevitable, but they lost something," a local cafe/coffee shop owner said.

* "It’s lost its mom-and-pop home-away-from-home feel," one customer said.

* In five years, Starbucks nearly tripled the number of stores worldwide, from 5,886 in 2002 to 15,011 in 2007. The company is by no means losing money: It earned $673 million in profit on $9.4 billion in net revenue for 2007.

* By the end of the year, Starbucks stock, once seemingly invincible, had declined by 42 percent.

* Mr. Schultz had already outlined many of the problems in a Feb. 14, 2007, memo that is now famous. Entitled “The Commoditization of the Starbucks Experience,” the memo acknowledged that rapid growth had diluted the Starbucks magic.

* "It’s being overbuilt, classic over-saturation," said Marc Greenberg, analyst at Deutshe Bank. "How many places do we need? Aren’t we there? Is it hard to find a Starbucks?"

* Geoff Vuleta, chief executive of Fahrenheit 212, an innovation consultancy in New York, said Starbucks had lost focus on the experience that drew customers in the first place by neutering the baristas and by crowding the stores with merchandise, or as he put it, “replacing mystique with relentless commerce."

Here's a link to the entire New York Times article.

So what do we learn once again from this? Well, if you have a business of any kind, include service businesses and careers in the arts, quit trying to grow so fast and diversify. Stay laser-focused on giving of your unique talent/offering that drew your base to begin with. Satisfy your "core fan base" and grow it by continuing to deliver the magic they originally signed up for. The rest will follow.

peace,
-Forsyth