Every part of my town has at least one Starbucks. They are also all over the globe. Everywhere you go, there they are. In most of the countries I visit, they are usually devoid of customers. I never understood how those stayed open. Here in my hometown, you can't throw a rock without hitting a Starbucks. They over-expanded, likely in an attempt to dominate over smaller coffee shops.
Starbucks sells coffee products at a highly-inflated cost to the consumer. The stores do present a pleasant environment and a wide variety of coffee products with exotic sounding names. But, in the context of today's economy, the cost is prohibitive to many. At the end of the day, coffee is the same, whether made at home, or bought at Starbucks. While coffee prices have risen dramatically, making your own coffee at home is about a fifth of what you'd pay at Starbucks. The recent closing of 600 stores is a reflection of the public's desire to cut back on spending, and is just the start of the fall of Starbucks.
Everywhere you turn, there is a Starbucks Coffee. These stores have almost turned into a McDonald's-like chain. When Starbucks moved into towns, they closed down the local coffee shops and, within a few years, the big corporate giant was everywhere. I believe people are tired of the big companies, and have gone back to supporting local establishments. Starbucks was trendy and, like all trends, they are fading. The new "local" movement is something that I think will continue to hurt Starbucks stores in the future, as people move away from it and towards smaller, hometown places that are more personable and profitable for the community.
I believe that Starbucks expanded too fast and now that we are in this terrible economy with people having to watch what they spend so carefully that the company may be well on the way to its demise. Their products are very expensive and this is one thing that can very easily be cut out of your budget without repercussions.
Starbucks enjoyed a long run because we bought into all the hype, and we wanted to be oh so cool. But if this economic nightmare we live in has taught us anything, it's to prioritize. Most of us simply cannot afford to spend 50 bucks a week on designer coffee. We've learned that Folgers does just as well, made at home for pennies a cup. Starbucks' biggest downfall was installing wireless Internet. For the price of one cup of coffee, a patron can sit there with a laptop all day long and people watch, which they do. It's more interesting than the public library and there's no time limit.
Starbucks simply has too many locations and too high of prices to continue operating in its current model. Often times, you are able to find two, if not three, Starbucks locations within the same mall or even city block. Economically, it does not make sense to pay for the costs of employment to have 2 stores within walking distance of each other. Financially, it will make sense to reduce the overhead of having too many locations and simply focus on making more profits.
Starbucks closing of 600 stores just indicates that, in this economy, they have reached their saturation point, and that they can not expand further until the economy starts to pick up again. While Starbucks may have more competitors these days, they have the lion's share of the luxury coffee market.
The economy is mainly to blame for Starbuck's fall. Their competitors are taking away customers from Starbucks by offering cheaper and possibly better-tasting coffee for less money. Top competitors like Peet's Coffee and Caribou Coffee are expanding. McDonald's and Dunkin Donuts also offer much cheaper coffee, making Starbucks not obsolete, but at least much less relevant.
Starbucks has always sold overpriced coffee. At first, this was a fad for yuppies and people with too much free money: "I paid $5 for a cup of coffee" was a badge of honor.
Now, other companies (eg, Dunkin Donuts) offer the same coffee for a much lower price. As unemployment rises, former yuppies must save money by not frivolously overspending on otherwise-cheap items
With the onset of Starbucks and its fast and varied coffee choices, I think it did expand too fast and flooded the market. However, I do not think it will collapse. Those who loved the new Starbucks in my community supported it, and those who didn't stuck with the traditional coffee shops. In my small community, I did notice that they tried to take over the coffee market, and were unable to do so. I think they are currently taking a hit, but they won't fall into oblivion.
Starbucks has exploded in popularity for one reason; people love their coffee. Management made a mistake in expanding too rapidly and changing the basics that made Starbucks what it was. I believe the afternoon closing of every store for a conference call shows their commitment to making the changes needed.
I think closing a lot of stores doesn't mean the total demise of Starbucks. There was just an overabundance of them. People will still go there, they're still popular, but there isn't a need for 3 coffee shops on every street. They charge a lot and since our economy took a hit, people can't afford to spend so much on a cup of coffee in a see and be seen type of establishment. Not when they can brew it at home for a fraction of the cost.
I think people will be more financially aware of their miscellaneous spending but coffee is something that has always been in demand. More and more companies and restaurants are starting to sell their own coffee and coffee drinks but no one has the experts of Starbucks. Starbucks still has the best quality and taste and it will always be in demand for coffee drinkers even with the higher price than others.
In 2006 Starbucks had 400 stores in China and less than 10% of it revenue came from China. In the US Starbucks has 11,500 stores. There is ample room for growth in international markets for Starbucks.
Starbucks may have opened too many stores, but I think it is adjusting to the economy and can still thrive, perhaps with less stores. We are in a troubled economy, yet there was still a long line at Starbucks when I stopped for coffee this morning. There is still a large demand for coffee, and many people are addicted to Starbucks. The company may not as many new stores as before and may close some, but it doesn't mean a complete demise.