Suddenly a Lot Less Starbucks Abound

Seems that newly returned Starbucks CEO Howard Schultz is already making headway in his efforts to return Starbucks to the head of the coffee chains. With newer 'threats' in the coffee market like McDonalds and Dunkin' Donuts, it's hard not to be worried; especially when you are charging nearly double what the competitors are for half the amount of coffee. Schultz has already started taking steps that are meant to return the coffee giant to its roots and make it more competitive in comparison to newer coffee market entrants. In a nutshell, Schultz is looking to reduce the number of stores being opened in order to cut down on canibalization of neighboring stores; there will be more emphasis on returning to a coffee selling approach, and there will be a reduction in non-coffee items being marketed by the company.

It's interesting to see primarily because I can see some similarities between what McDonalds has been trying in response to Starbucks and what Starbucks is trying in response to McDonalds (and others). For example, Starbucks gained popularity with the young because it promoted a non-alcoholic alternative for the young out there. Though kids love McDonalds, the corporate policy is to not encourage loitering in their locations (unless accompanied by parents) and so kids needed another place to hang out with friends besides the mall. Starbucks often became that location. Being popularized by shows like Friends and such, hanging out in coffee houses was a trend that came over from Europe and has found new roots here. McDonalds was quick to react and after a few test stores which were converted to more of a 'coffee house' type of decor, the redecoration boom began and now many McDonalds are looking like swankier not-so-fast-food fast food places. A change for the better; and in an effort to gain customers back. And you know what? It worked.

McDonalds still has an unwritten policy (or so it seems) on excessive loitering by customers but it's not as pronounced as it once was. They have found that people who linger are more likely to continue buying. Starbucks attempted at one point to enter the breakfast food market as well and began selling breakfast sandwiches. The only problem was that like the coffee, the sandwiches were costlier than the competition. One can argue that you can't get the same quality of sandwich at McDonalds as you could at Starbucks but then again, how many people are that choosy? People who have such high standards probably don't frequent either of the places anyways so what's the purpose? If Starbucks was hoping to land customers based on the prestige factor then they put their eggs in the wrong type of basket. I never tried any of the sandwiches at Starbucks and though they looked good, I just couldn't stomach paying as much for one sandwich as I would pay for three at McDonalds. Call me cheap or fiscally conservative but I know I'm not in the minority.

Starbucks was a big draw during the dot com boom; everyone was someone when they were seen with a cup of Starbucks coffee in their hand but without it, they were seen as just an average joe on the street. Or that's what everyone like to believe. When the market was good, spending on extravagance items like Starbucks shot up through the roof. More demand means a greater need for coffee locations. More locations means less wait and greater income (or so the theory was). Now that the economy is slightly shakier and investor and consumer confidence is a bit lower, people's willingness to spend on items like a $5 cup of coffee suddenly drops and that is when McDonalds came in to try and steal Starbucks thunder. They are doing a decent job of it too.

For good or for bad (depending on the image they are trying to portray), McDonalds has a reputation for being a place to get a decent meal for relatively low cost. I won't deny that I have had McDonalds on occasion (sometimes more than I should) and the fact that my dollar gets me a lot more there than at other places is a motivating factor. Sure I can have my cup of coffee at Starbucks (which I still do and which I still enjoy) but when I'm hungry, I know I'll get more to satisfy my hunger than just a cup of coffee with some side items. I think most people look at it that way. Starbucks was losing focus on its original concept and that was the fact that they were offering a product that was seen as higher end than the rest. I think when the market started getting with Starbucks locations, the image went from unique to McDonalds-like. It might not be a bad comparison but people began to see it as a generic place rather than something to be appreciated. I know I did. I'm hoping Schultz is able to return the company to some level of its originality.