The Wizard and Howard Schultz
The lovely and talented David Freeman sent me an email this week – David being one of the dozen or so people whose emails can actually get through my steroid-enhanced spam filter – and in it he pointed out the sharp discrepancy between my view of Starbucks decline and that of Howard Shultz.
In a nutshell, the founder of Starbucks believes their traffic is in decline because they got too efficient.
I say they didn’t get efficient enough.
Survey a million Americans and here’s what you’d learn:
“Are you a Starbucks customer?”
“Yes, absolutely. I can’t get enough of it.”
“Why do you go to Starbucks?”
“I go for the coffee and the atmosphere.”
“Do you like Starbucks as much as you ever did?”
“Do you go there more often, less often, or about the same as one year ago?”
“I go there every chance I get.”
“Who do you believe is Starbucks biggest competitor?”
“Starbucks doesn’t have any competitors as far as I’m concerned.”
And there you have it, America, the story of a powerful brand with fanatically loyal customers.
But a survey can’t measure what the customer himself doesn’t know. In this case, what the customer doesn’t realize is that he used to go to Starbucks an average of 5 times a week, but lately he’s been averaging only 4 weekly visits.
McDonald’s, Winchell’s and Dunkin’ Donuts have each improved their coffee enough that once a week or so, when our Starbucks fiend is in a hurry, he’ll whip through one of these places and be contented with better-than-average coffee.
The Queen of Cookies, Mrs. Fields, once said, “Good enough never is.”
Sorry, Debbi, but sometimes “good enough” really is good enough. Just ask Howard. His traffic is down even though his stores haven't lost any customers.
Everyone who ever loved Starbucks still loves Starbucks.
They just love it once or twice a week less often.
Frankly, I like Howard Schultz. My heart agrees with his. His famous email to Jim Donald, CEO of Starbucks, makes several astute observations about how Starbucks strayed from their core values. I agree with his observations. I just don’t believe they’re at the core of Starbucks decline in traffic.
There was a big controversy about whether or not the email was authentic or fake. Starbucks spokesperson Valerie O'Neil has now confirmed its authenticity, as has the Wall Street Journal, BusinessWeek.com and Bloomberg.com.
So we’ll let Howard have the last word. Here’s his email:
Subject: The Commoditization of the Starbucks Experience
As you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you.
Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.
Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista. This, coupled with the need for fresh roasted coffee in every North America city and every international market, moved us toward the decision and the need for flavor locked packaging. Again, the right decision at the right time, and once again I believe we overlooked the cause and the affect of flavor lock in our stores. We achieved fresh roasted bagged coffee, but at what cost? The loss of aroma — perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the customer, and once again stripping the store of tradition and our heritage? Then we moved to store design. Clearly we have had to streamline store design to gain efficiencies of scale and to make sure we had the ROI on sales to investment ratios that would satisfy the financial side of our business. However, one of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. In fact, I am not sure people today even know we are roasting coffee. You certainly can't get the message from being in our stores. The merchandise, more art than science, is far removed from being the merchant that I believe we can be and certainly at a minimum should support the foundation of our coffee heritage. Some stores don't have coffee grinders, French presses from Bodum, or even coffee filters.
Now that I have provided you with a list of some of the underlying issues that I believe we need to solve, let me say at the outset that we have all been part of these decisions. I take full responsibility myself, but we desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience. While the current state of affairs for the most part is self induced, that has lead to competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated.
I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. Let's be smarter about how we are spending our time, money and resources. Let's get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others. We source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world, and we have an enormous responsibility to both the people who have come before us and the 150,000 partners and their families who are relying on our stewardship.
Finally, I would like to acknowledge all that you do for Starbucks. Without your passion and commitment, we would not be where we are today.