The funny thing about Starbucks is it’s helped to create a coffee culture filled with a significant number of people who don’t actually like Starbucks—which means that, despite conventional wisdom, it’s actually a good thing to be a mom & pop coffee shop with a Starbucks nearby, writes Slate. Instead of stealing your business, you get the spillover from their store. “They’ll do all of your marketing for you, and your sales will soar.”
That’s certainly how it worked out for Hyman. Soon after declining Starbucks’s buyout offer, Hyman received the expected news that the company was opening up next to one of his stores. But instead of panicking, he decided to call his friend Jim Stewart, founder of the Seattle’s Best Coffee chain, to find out what really happens when a Starbucks opens nearby. “You’re going to love it,” Stewart reported. “They’ll do all of your marketing for you, and your sales will soar.” The prediction came true: Each new Starbucks store created a local buzz, drawing new converts to the latte-drinking fold. When the lines at Starbucks grew beyond the point of reason, these converts started venturing out–and, Look! There was another coffeehouse right next-door! Hyman’s new neighbor boosted his sales so much that he decided to turn the tactic around and start targeting Starbucks. “We bought a Chinese restaurant right next to one of their stores and converted it, and by God, it was doing $1 million a year right away,” he said.
We’ve noticed that Starbucks has had another “positive” effect on the coffee house industry—it’s trained consumers to willingly pay over $1.50 for a cuppa joe no matter where they’re buying it. Maybe this is why “Just over the five-year period from 2000 to 2005… the number of mom and pops grew 40 percent, from 9,800 to nearly 14,000 coffeehouses,” and “the failure rate for new coffeehouses is a mere 10 percent.”
P.S. Starbucks is awesome. Playstation is awesome. Nintendo is awesome. Apple is awesome. Microsoft is awesome. Dunkin’ Donuts is awesome. Just wanted to prime the comments a little before we head into the weekend.
“Don’t Fear Starbucks” [Slate]
(Photo: rudolf_schuba)
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Sounds like my neighborhood near Boston. Two very successful local breakfast places with lines out the door every weekend. One moves next door for more space and, lo and behold, the landlord takes the vacant space and makes a new breakfast space! Stealing the people standing in line in the rain is a time-honored business practice.
Yes, being able to open next to a Starbucks doesn’t guarantee success. Living in the rural midwest, I’ve had the misfortune to try out several coffee places where the brew is sub-gas station quality. It’s easier to say that the Beast of Seattle shut you down than to admit that you barely knew how to boil water.
@drjayphd: Guy: Can I help you?
Bart: I’d like to get my ears pierced!
Guy: Better make it quick, kiddo, in five minutes this place is becoming a Starbucks!
@just_paranoid: I know, right? I honestly don’t live in a tiny city though, its weird. Can a city council give sBux the finger if they wanna move in? Because if they can, and if thats what they did…then I’m gonna go hug my mayor.
Let’s be honest with ourselves here. $2 (w/ tax) for a cut of venti coffee is not expensive. Those food stands sell coffee for $1 and the cups are really small. I personally drink a lot of coffee, so Starbucks is a bargain. Let’s not forget their free refill.
Great Post. I love Starbucks and competition two powerful forces in business.