Sunday, July 20, 2008

Starbucks to Shutter 600 Stores. Is "Your" Fave on the List?

In a cost saving move, Starbucks is shuttering 600 stores (click here for the national list), with job losses totaling in excess of 12,000. Long the ubiquitous coffee retailer, the java giant has noted that (1) McDonald's and Dunkin Donuts has been "eating their lunch" winning coffee tastings and now offering free wifi and confortable louges and (2) the retailer is no longer "special" with the now-jettisoned breakfast sandwiches, increasingly dirty stores, inconsistent brew and stores on every corner. In an effort to getting back to its core business and core market, returning Starbucks head roaster, Howard Schultz, has high hopes for the newly-reengineered, post-closure chain.

I'm sure that this is not the only changes the coffee retailer will be making in the near term. After the beans settle, I'm certain there will be other store closures. What has long bothered me about $tarbuck$ is that it says it is "really selling an experience." OK, but in truth they're using the Walgreens hedgehog (read Good to Great for an explanation) of ubiquity--being everywhere. Hell with the experience. Me? I would have closed those stores in Targets--the ones next to the pizza stands and bedraggle stoppers--and any other location that didn't have the customer feel "special." Because in not doing so, McDonald's, which is now offering free Wifi and cafe lounges, will continue to eat up their market share.

Just as an interesting point of reference, LA lost only two stores to my home city's (Indianapolis) seven, three are stopping operations in Sacramento and a whopping 10 in San Diego. Makes me wonder which set of miscreants was asleep at the switch to have green-lighted the opening of so many stores past the saturation point, particularly in overly-caffeinated San Diego. Even a fouth grader could look at market trends and see that Starbucks had been in trouble for quite some time--that market share would drop off the moment a cuppa joe cost more than a gallon of gas. Hope they get their marching papers soon.

As many of you know, I'm not a fan of RIF's as a way to "clean up" bad business decisions. As an executive coach focusing on business and people strategy, I know that workforce reductions should be the last resort after having made careful decisions along the way. You wouldn't want a doc who was amputation-happy, now would you? Didn't think so. Neither would one want company leaders who, ignoring reports of organizational "pain" (increased competition, declining revenues, changes in purchasing patterns), opt to make workforce cuts to clean up their messes without working to ensure that they've gotten to the root of the malaise.

Oh and promise not to cry if you see your store on the list.

Cross-posted at Smaller Indiana and American Values Alliance


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