I resisted getting a copy of Starbucks President, Howard Schultz' new book Pour Your Heart into It : How Starbucks Built a Company One Cup at a Time. Seems PT Barnum (a business maven from another time who was one-half of the Barnum and Bailey Circus) summed up his business model with his own: "There's a sucker born every minute, and you are right on time."
As I sit at the health club, feeling smug about my cheap cup of Joe (I'm not a coffee drinker, so this isn't going to go well), I read this funny take on the Starbuck phenom.
You want coffee in a coffee shop, that's 60 cents. But at Starbucks, Cafe Latte: $3.50. Cafe Creamier: $4.50. Cafe Suisse: $9.50. For each French word, another four dollars.
Why does a little cream in coffee make it worth $3.50? Go into any coffee shop; they'll give you all the cream you want until you're blue in the face. Forty million people are walking around in coffee shops with jars of cream: "Here's all the cream you want!". And it's still 60 cents. You know why? Because it's called "coffee." If it's Cafe Latte -- $4.50.
You want cinnamon in your coffee? Ask for cinnamon in a coffee shop; they'll give you all the cinnamon you want. Do they ask you for more money because it's Cinnamon? It's the same price for cinnamon in your coffee, ask for coffee without cinnamon - 60 cents! that's it! But not in Starbucks. Over there, it's Cinnamonnier - $9.50.
You want a refill in a regular coffee shop, they'll give you all the refills you want until you drop dead. You can come in when you're 27 and keep drinking coffee until you're 98. And they'll start begging you: "Here, you want more coffee, you want more, you want more?"
Do you know that you can't get a refill at Starbucks? A refill is a dollar fifty. Two refills, $4.50. Three refills, $19.50. So, for four cups of coffee - $35.00. And it's burnt coffee. It's burnt coffee at Starbucks, let's be honest about it. If you get burnt coffee in a coffee shop, you call a cop. You say, "It's the bottom of the pot. I don't drink from the bottom of the pot." But when it's burnt at Starbucks, they say, "Oh, it's a Blend. It's a blend. It's a special bean from Argentina...." The bean is in your head.
Do you remember what a cafeteria was? In poor neighborhoods all over this country, they went to a cafeteria because there were no waiters and no service. And so poor people could save money on a tip. Cafeterias didn't have regular tables or chairs either. They gave coffee to you in a cardboard cup. So because of that you paid less for the coffee. You got less, so you paid less. It's all the same at Starbucks, no chairs, no service, a cardboard cup for your coffee - except in Starbucks, the less you get, the more it costs. By the time they give you nothing, it's worth four times as much. Am I exaggerating?
Did you ever try to buy a cookie in Starbucks? Buy a cookie in a regular coffee shop. You can tear down a building with that cookie. And the whole cookie is 60 cents. At Starbucks, you're going to have to hire a detective to find that cookie, and it's $9.50. And you can't put butter on it because they want extra.
They don't give it to you. They tell you where it is. "Oh, you want butter? It's over there. Cream cheese? Over here. Sugar? Sugar is here." Now you become your own waiter.
You walk around with a tray. "I'll take the cookie. Where's the butter? The butter's here. Where's the cream cheese? The cream cheese is there." You walked around for an hour and a half selecting items, and then the guy at the cash register has a glass in front of him that says "Tips." You're waiting on tables for an hour, and you owe him money? Then there's a sign that says please clean it up when you're finished.
They don't give you a waiter or a busboy. Now you've become the janitor. Now you have to start cleaning up the place.
If I said to you, "I have a great idea for a business. I'll open a whole new type of a coffee shop. A whole new type. Instead of 60 cents for coffee I'll charge $2.50, $3.50, $4.50, and $5.50. Not only that, I'll have no tables, no chairs, no water, no busboy, and you'll clean it up for 20 minutes after you're finished."
Would you say to me, "That's the greatest idea for a business I ever heard! We can open a chain of these all over the world!"
No, you would put me right into a sanitarium.