What the hell is going on with Starbucks?
They are closing 61 out of their 84 locations in Australia, but I can’t see why. One of the locations due to be closed I know very well, it’s Starbucks in Chatswood – a rich suburb and it’s the only Starbucks there. I walk past it a lot and it’s always full.
How can you lose money selling $6 coffee to rich Chinese 16 hours a day? I had assumed they were raking in the cash. The Taiwanese tea shop across the road has premises twice as large, charges less, has half the patronage, and they’re doing fine. No other shops around are closing.
Sure, American businesses sometimes misjudge the Australian market. Krispy Kreme has struggled here, discovering belatedly that oil-soaked donuts are not exactly part of the staple diet here – but even so the KK store in Chatswood is still doing fine after downsizing. And it’s not like coffee is unpopular; quite the opposite. In fact I noticed a new café opened just last week, very close to the SB. Something doesn’t add up!
Anyway, my favourite branches (Darling Harbour and George St) will be staying open so it’s not like I care all that much – just amazed that anyone could possibly lose money with such a seemingly foolproof brand. Starbucks Inc has obviously screwed something up in a big way Stateside and are cutting back international operations as a result. Wonder if the Japan stores are next.
UPDATE:
I’ve been thinking about this some more, and factoring in my own purchasing habits to understanding SB’s problems in AU.
Let’s think about my purchasing patterns:
Number of times I have bought prepared beverages, hot or cold, outside the house in the last year: maybe 100+
Number of purchases from Boost Juice: 30+
Number of purchases of pearl milk tea or other chinese drink: 20+
Number of purchases of coffee from a non-SB café: 50+
Number of purchases from Starbucks: uh, 1 or 2, I forget, both green tea frappucinos in summer
I think that, upon further reflection, I am beginning to see the problem.
Maybe Starbuck’s competition in Australia is much stronger than in the USA, or indeed Japan. Here, if I want coffee, I very rarely buy it from SB. There are plenty of other cafés around, and generally their coffee is better than SB.
If I want a cold drink, I will usually buy either a fruit drink from Boost or some kind of chinese pearl milk tea. Both are delicious, Boost is healthy, and both are cheaper than SB. Also more convenient, open later, and I know some very nice bubble tea places with nice gardens to sit and read.
Basically Boost wins over SB 9 times out of 10. If I’m going to pay $5 or more for a drink, I want to actually get something for my money – my favourite drink from Boost has a banana and yoghurt, sweetened with honey and plenty of milk. SB is little more than water, flavour, corn syrup and crushed ice. I like it sometimes, sure, but when I think about how often I actually buy that – not very.
I drank SB much more in Japan and I think that’s where I started thinking I liked it more than now. But upon reflection I only drank it so much there because there simply wasn’t anything else. Plus, it’s cheaper there, and the stores are open later. I remember wishing they had Boost there, and some better coffee places too – now I’m in AU I simply go to them instead.
Maybe SB isn’t such a sure fire success in Australia after all.
UPDATE 2:
Some good analysis here and .