Can’t say I’m surprised by the news that Starbucks is closing 600 stores nationwide. First of all, they were over expanding to the point of cannibalizing other stores, but were OK with it as long as consumers were still drinking Starbucks coffee.
In college, we spent a lot of time reading case studies about Starbucks. They were sort of the ideal company; great growth strategy (we thought), unbelievable brand strength and even admired for being a good employer. Starbucks apparently over-estimated their domestic growth capabilities, and it wound up biting them. We don’t know a lot about the closings yet, but we do know that most of the 600 stores were opened since the beginning of fiscal year 2006. To me, this suggests poor location decisions. Whether opening in new, unproven communities or blanketing existing locations, these stores did not have the customer base to support them and even dragged down other successful locations. The tanking economy doesn’t help either.
Unfortunately, the real loser in all of this is the 12,000 or so employees that will soon be jobless. Starbucks does hope to relocate many of these employees to continuing locations. Lets hope they do!
Overall, I think Starbucks will rebound from their recent struggles. Their ‘return to their roots‘ strategy will pay off in the long run as Starbucks redeems itself as the world’s best coffee experience. I also like their new WiFi agreement with AT&T, as well as the Starbucks iTunes music store. Their brand is strong enough to carry them, and new innovations such as iPhone ordering is just awesome.
