OK, those of you who drink coffee with me know that while I'm not a great Starbucks fan, I sometimes find it the most viable alternative in a neighborhood I don't know. While many local neighborhood coffee places have more atmosphere and a more edgy vibe than Starbucks, too often it's hit or miss with the quality of the coffee. They simply don't have the buying power, discipline and economies of scale.
At a recent Starbucks visit with some friends, I speculated that Starbucks is turning into a bland McDonalds of coffee. While at Microsoft I interviewed the person who then owned management of the Starbucks brand for a job in my division. He characterized the Starbucks experience as "self indulgence" and told me that is what had driven the average customer to visit Starbucks 3.7 times per month spending an average of approx. $23 per month.
Providing a self-indulgent experience on a long term basis becomes hard. Anything we do a lot, and that everyone else does (like going to Starbucks) somehow feels less self-indulgent. This is where my visit to Starbuck with some friends turned into a discussion around the viability of creating a chain (coffee or food) where every single store is different, yet all the stores benefit from the economies of scale of a large company like Starbucks.
Much to my surprise, and delight I must say, Starbucks just announced a store experiment in Seattle. The store will open as 15th Avenue Coffee and Tea, complete with new interiors and no reference to Starbucks.
Starbucks uses the rather clinically sounding term "community personality" to describe what they want the store, and potential follow-on stores, to have.
So how do you create a store that really becomes a local neighborhood fixture, as opposed to a "stealth Starbucks" where you know after a couple of visits that "this feels corporate?" Well, think LEGO meets Zazzle. You hire people from the community as opposed to drive-in professionals on a Starbucks career path that sends them around neighborhoods they don't care about. You give the store managers wide authority to shape the store based on the local "hood" as opposed to a corporate style guide or manual. You let the store manager choose from a wide array of customizable SKUs, so each coffee bag, mug etc. has the logo of the local store. In fact, there has to be so many SKUs that no two stores look alike. The last thing you want is for the mugs in all stores to be the same mug, just with another logo.
What's really interesting about this experiment from a business point of view is that it can, if managed well, accelerate Starbucks profits in multiple dimensions. First, you'd probably be able to get more frequency out of the visitors, say get them to come 4.7 times per month instead of 3.7 times. You could probably also charge a bit more for this "nanosegmented experience" since it's more "you" than a generic Starbucks. Let's say Starbucks monetize the stores with $7.00 per visit per customer rather than the current $6.20. With those changes, you've already increased your monetization per customer by 43% per month.
This experiment will indeed be interesting to follow. In particular, I am curious to follow how Starbucks implements and manages "community personality" and keeps it fresh.
The mug collectors would love that idea. :)
Do you really think that nanosegmenting will work? Especially with the results you are describing? Will be interesting to see.
Posted by: Pineas | August 06, 2009 at 01:28 AM