Starbucks closes 600 stores
Another Seattle employer seems to be catching a cold from the nation-wide economic downturn. Starbucks is closing 600 stores.
I remember that just a few years ago it would have been unthinkable to contemplate Starbucks running into trouble. But I suppose we can't possible compare a derelict firm like Starbucks to the likes of Boeing, Amazon or Microsoft. No, those high-powered companies will never stubmle.
Maybe that anti-recession force field around the Puget Sound is starting to weaken after all.
http://www.msnbc.msn.com/id/25482250/
P.S. I wonder how this will impact my friend who took a second job as a Starbucks barista to deal with his family's credit card debt. But they are "rich", of course, since their East Side home has appreciated so much while my family has been slumming it in a lowly rental, throwing our money away...
I remember that just a few years ago it would have been unthinkable to contemplate Starbucks running into trouble. But I suppose we can't possible compare a derelict firm like Starbucks to the likes of Boeing, Amazon or Microsoft. No, those high-powered companies will never stubmle.
Maybe that anti-recession force field around the Puget Sound is starting to weaken after all.
http://www.msnbc.msn.com/id/25482250/
P.S. I wonder how this will impact my friend who took a second job as a Starbucks barista to deal with his family's credit card debt. But they are "rich", of course, since their East Side home has appreciated so much while my family has been slumming it in a lowly rental, throwing our money away...
Comments
It seems that they are closing 600 out of about 6900 US owned stores, so about 9%. 70% of the stores were opened since 2006 and lots of them were not profitable. 9% is quite a decent amount,
http://www.fool.com/investing/value/200 ... rnova.aspx
So it appears they're trying to remove stores that they now realize they never should have had in the first place, as well as shut down some stores that are perhaps marginal and anticipated to cease being profitable or break-even in the near future.
It's more related to an over expansion in the past, when the economy was doing fine. It remains to be seen how much of an additional impact the bad economy will have, but most people expect it to be quite bad.
Personally, I don't know. I suspect that they'll still continue to do OK while manufacturers of big ticket items will do terribly. Car sales have fallen off a cliff, and big TVs will too once the feds stop sending checks!
I wonder what the margin difference is between a latte and their drip coffee. I suspect they still make just as much money off drip as there is less milk (expensive) and you can probably eek more brown stuff out of the grounds with drip than you can with espresso. I suspect customers will continue to go to Starbucks but will move back to drip coffee in larger numbers.
True, people will maintain, or increase, spending on cheap entertainment options while they eliminate more expensive alternative (e.g. foreign vacations, trips to Disneyworld, etc).
However, I don't think it is clear that movie theaters themselves will thrive in a recession. Unlike depression times we now have things like DVDs and television. People might be more willing to buy a DVD than cough up $12 for a ticket to the theater.
Unfortunately, movies now cost about $9, and that's just the soda.
I heard that Netflix subscriptions were doing rather well these days. The ability to save money by eating in AND watching a movie at home is somewhat of a double win. Plus, the whole family can watch a netflix movie for the cost of one subscription. I can imagine that taking a family of four to the movies could cost $50 or more when you include gasoline, tickets and a small amount of soda/food. That's almost 3 months of a netflix subscription.
Good point, but don't forget video games. Even a really short single player game gets you 4hrs of entertainment. And multiplayer games offer near limitless enjoyment for only the initial cost.
Now I use a DLP projector into a STEREO (no surround) and rent almost all my movies at the $1 machine at QFC. I even cancelled my membership to Netflix almost two years ago becuase there are simply not that many good movies. And if they ARE good, I own them.
Movies are a mere commodity now. The main reason I have the 7 foot projector is because we dumped tv in 1997 and only watch movies, and the screen hides away while the projector is the size of a couple of hardbacks. IOW, it takes no space and you'd never know we have it when we're not using it.
Why the diatribe? Mainly because I like to hear myself type. But also to say, I fully agree with you. I used movie theaters as an example of something cheap that people will blow their money on because they have it. Another guy in Mexico mentioned in an article (at Fredoneverything.net) about guys with no money that seemed to always be able to afford a beer at the bar.
I learned, when selling Fuller Brush in the very early 1970's that the difference between poor people and rich people is that rich people know that you spend your money one dollar at a time. And skinny people know that you put on weight one snack at a time.
Bottom line - anything that is cheap and allows some amount of temporary pleasure will probably thrive during this downturn. Netflix or similar things may be just the ticket. Or Video Games. After all, if you're unemployed but at least have a good game system, you'll have plenty of time to play it.
But I agree that theaters are not the answer. They'll almost certainly collapse, though the creators of the movies themselves may flourish. In the depression, the theater was the only choice the masses had.
Once you get a large and/or sharp TV and sound system, the movie experience can actually be BETTER at home. And with Blue ray and CGI movies at 1080p, it is SHARPER than the theater. And it is much easier to control the sound quality in a small room than a theater.
Escapism. That's what flourishes in bad times. I don't see a relation to $4 coffees.
:roll:
Average Joe figured out problem awhile ago
Many Starbucks customers figured out long ago what the Seattle coffee giant seems to have just realized: Opening shops too close to each other isn't good for business.
"Starbucks was stupid," Leslie Miller said yesterday between sips of a decaf outside the chain's shop at the Massachusetts State Transportation Building in downtown Boston. "They put them right next to one another.".....
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The only money I spend at Starbucks is from gift cards people give me. And I'm a six cup a day guy.
Lax Real Estate Decisions Hurt Starbucks
Starbucks wants to get back to its roots to help turn around its ailing fortunes. It brought back the pioneering chief executive Howard Schultz to run the coffee chain day to day, and it has introduced a new blend, Pike Place Roast, that harks back to the location of its first Seattle store.
Yet for all the new marketing efforts, Starbucks's biggest mistakes and greatest challenges boil down to three words: location, location and location......
........The bitter economy is hurting countless retailers and restaurant chains. But the prospect of Starbucks closing stores, rather than opening them, is different. The company has long been known in the world of commercial real estate for its expertise at selecting prime locations and its fearlessness in establishing almost comic ubiquity in some neighborhoods.
Starbucks would not comment for this article. But it appears that the company strayed from the exacting real estate science that it had perfected and guided it through its first expansion wave.
Though the flagging economy and soaring gas prices are responsible for at least some of Starbucks's woes, interviews with commercial real estate brokers nationwide who work with the chain suggest another aspect of the story. These people say that the company was so determined to meet its growth promises to Wall Street that it relaxed its standards for selecting new store locations.
In some cases, brokers say, Starbucks misjudged the risks of putting stores close to each other, leading to the decline in same-store sales that the company started reporting for the first time in its history this year.
It also overextended itself in certain regions, like in the South and in Southern California, which are among the hardest hit by the housing crisis, and whose older demographics and hot weather are not generally conducive to creating long lines of customers eager to pay $4 for foam-top lattes.
"The economy exposed all the flaws in their thinking," said one commercial real estate broker, .......
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What? You don't like $6 popcorn, $4 drinks, crying babies, people talking loudly on cell phones, and seats that smell funny and have crawly things on them?
You...you..you....are not a PATRIOT!!! :twisted:
And $4 gas!
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