Friday, Nov 14, 2008
Starbucks Has Nothing To Lose - Freakin’ Go For It!
As of this moment, Starbucks stock is trading at $8.65.
That’s pretty low considering they were over $40 around 18-months ago.
One of the challenges Starbucks has faced in recent years has been growth pressure from Wall Street.
- There were times when Starbucks didn’t want to grow so aggressively, but they were dubbed a “high-growth company” and couldn’t risk slowing down in fear of stock devaluation.
- There were times when they wanted to focus on ‘bench strength’ and having ready-trained employees to replace those who got promoted.
- Times when they wanted to focus on re-training to better understand whole bean coffee.
- Times when they wanted to focus on creating better connections between employee and customers.
Starbucks didn’t want to break the growth machine.
Look at Starbucks now. The growth machine IS broken. The stock has low expectations. No one is expecting record sales. The fear of closing stores is gone.
Starbucks, what are you waiting for? You have nothing to lose. This is the best thing to happen to you! It could be worse, all these troubles could have been caused by a competitor burying you versus simply the economy. You’re lucky!
Now is the time to redefine yourself - the way you want to be - without fear!
- Fix the beverages so they’re again hand-crafted with pride and skill.
- Fix the training so every customer is greeted with a smile and feels valued. (I don’t mean give me a discount, I mean a drink worth 4-bucks, in a clean store, and a sense you appreciate my business).
- Teach the baristas about whole bean coffee
- Stop focusing on creating new Frappuccino flavors and re-inventing oatmeal and more on being coffee experts - roasting, whole beans, and home brewing.
- Stop opening new stores, and make the ones you have remarkable.
Freakin’ go for it.
12 reactions
Very motivational! I hope the SBUX folks are listening!
The last time I was in Starbucks, two days ago, the server was just not into his job — and it was very obvious. This is a problem that can be fixed — if there is a will. It might require better pay, it might require getting back to “the art of coffee” and making the “third place” a bit more of a reality by including some more sofa-like seating and space. I like my coffee, but some of that brewed stuff is, in my opinion, too strong.
[...] Paul wrote Starbucks Has Nothing to Lose – Freakin’ Go For It!. He’s got 5 great points for Starbucks…and if you shift the focus away from Starbucks towards [...]
A sage was once asked how to recite the whole of the Starbucks teaching standing on one leg.
He replied “serve a drink worth 4-bucks”. This is the whole of the law; the rest is commentary.
What does 4 bucks buy me?
1. a sensory escape: a wonderful aroma when I walk in the door; cool music
2. interaction with a barista that’s so different from what I experience elsewhere I will gladly stand in line to get it
3. better coffee than I can get anywhere else.
What I don’t want to pay for is refrigerated sandwiches, a coffee bar like the copy-cat ones in the mall, cute coffee mugs, chewing gum or icky snacks in icky plastic cups.
I drive 35 miles to buy whole bean coffee for my Starbucks home espresso machine. Before Starbucks opened in the east, I ordered cases of beans from Seattle and had them FedExed to me.
No-one from Starbucks has ever done anything to get and keep my business, and that includes the baristas where I buy my coffee who are obviously too busy to even smile.
Too late. Starbucks died about a decade ago when they went for growth at all costs. Humpty Dumpty cannot be put back together again. Not unless they shed about 90%+ of their stores and retain only those employees who know how to do more than push buttons.
Starbucks still has PLENTY to lose, mainly ownership control of the company.
Uncle Howard owns less than 2.5%. The institution investors own over 80%. If the stock continues to slide, (7.13 close today) a reverse-split may happen to shore it up, or it becomes a take-over target.
[...] He replied “serve a drink worth 4-bucks”. This is the whole of the law; the rest is commentary.1 [...]
I worked in recruitment for Starbucks for several years, and feel that the ultimate reason they have suffered is because of their ongoing negligence in hiring practices at the store level. When I began in my role, much of my time was spent ensuring we adopted best practices for hiring, and attracted the best of the best. Slowly, in our efforts to do more with less, recruitment staff was cut, the experts ended up leaving, and hiring became just one more thing on the checklist. Nowadays, hiring is a “warm body” approach, not looking for the best talent.
there are three s-bux around where I live in pa and both of them do not compare in service, quality, or cleanliness to the two local roasters who operate independent shops that are frequented by college students and businesspeople alike. honestly the sbux shops in my area were always lifeless and boring except for one.
Great post. Some things seem so obvious, yet those directly involved have difficulty seeing the forest for the trees. With the Wall Street meltdown that has occurred, hopefully more companies will start take a longer term approach rather than operating quarter-to-quarter, along with focusing on fundamentals. I really hope that people from many companies visit your site to read what you wrote. Well done.
FYI, I included a reference to your post in a blog post I wrote (including link back to yours).
http://www.amazingleadership.com/blog/roy/dont-add-take-away-business-lesson-karl-von-clausewitz-and-tim-ferris
Starbucks is actually in a good position now to rectify some of the things they’d lost sight of. They still have a strong brand and a great base to work from, so, as you say in the post why not Go For It. They recently announced a sweeping effort to use fair trade coffee in Europe and that is a great move because it’s the Right Thing To Do. In the long run it will pay off for them.
Here’s some insight I posted elsewhere, but wanted to provide a different perspective:
The problem is at a District and Regional level. I was employeed for 5 years, starting at barista and working up to Assistant Store Manager. I had good experiences with all of my district managers until my last one. I was fired for leaving money briefly un-attended while dealing with various customer and partner problems that day. I was never disciplined prior to that day for that violation. It was frequently something that people do because of the nature of the business. It was something that I had seen from ALL managers, in each store I worked at from time to time. Not only that, after I was fired, I found out she had an embarrassing personal situation that I think she thought I knew about, and somehow disliked her for it…but I digress.
Obviously the Starbucks Experience has been declining in the past year or more. Customers are more routinely dissastisfied with the product and service, and it is directly related to the high turnover rate at the barista level. This however has been fueled recently by the need for Starbucks to re-allign its management(salaried)/hourly ratio from a 40/60 to a 20/80. So now they need excuses to fire managers, preferably higher paid, and thus often the longer tenured ones. The problem is, they were often the only ones enforcing the standards that made the company popular and sucessful to begin with. I understand at will employment, and the need for accountability to the stock holders. I understand that I wasn’t garunteed a job for life even though I thought that was what I had. The fact is, wether it was personal or strictly managing from a district P&L level, they fired a very loyal dedicated and hard working employee, who was commited to raising the level of the experience of his customers, specifically by bonding with and developing the newest baristas to uphold the same standards I was taught over 5 years ago. Now they have a bigger gap between the upper management and the hourly partners, which results in a more drastic varience between individual visits. If the Manager, or District Manager are in the store, perhaps people are on their best behavior. If not, you’re likely to get a bad experience. The turnover they have created has destroyed their credibility in the market, which has in turn caused declining sales and customer count.
I’ve seen customers from the stores I worked at thoughout the years, and most frequently I hear “it’s really gone down hill since you left that store.” I’m not saying this because I think I was the BEST worker, but merely because they felt like they were always put first, cause they were. I was the guy that stopped doing stuff cause the line got too long, instead of ignoring the elephant in the room cause I had to make sure the display had all the mints and gums facing the same way, or I just needed to finish some paperwork before going home, or even worse because “I was supposed to be off at 2:30p.m and its already 2:45!” I was fired in by a District Manager who had been with the company atleast 2 or 3 years less, with my Regional Director being at the position for about the same amount of time as my District Manager (based on the employee numbers they used). The fact is they fired a good one (and without good cause according to the EDD).
When I was fired my stock was worthless. They offered no severance package. I was told I was being fired for “something we routinely seperate managers for.” When I responded, “it’s something that every manager does,” she replied “we’re gonna get ‘em too.” Right. Call it for what it is. The product has outlived its “trendiness” and the people who went for the experience just aren’t getting it anymore. The baristas don’t care, cause most dont have stock in the company, and don’t plan on doing more than working for a quick paycheck and to give out free drinks to friends. Even worse, the new class of upper and middle management isn’t as heavily committed or invested in the stock so who cares about declining sales and customer count, as long as I still have a signed paycheck, right? I had no animosity towards the company or anyone personally until the day I was fired. I was even ammused when the same position in the same area was posted online only 2 months after I was fired. I’m glad I worked there for the time I did. I got great training, learned some valuable skills, and also had some great customer/employee friendships. I also learned that politics and budgets mean more than investigation and introspection. For a company that promotes “dignity and respect” as its first guiding principle, and “create enthusiastically satisfied customers all of the time,” as its fourth, it would appear that in the trying times the sixth principle is more important: “recognize profit is essential to our future success.”
Is the experience you got today, or last week, really worth the money you have to work hard for? If you have to work hard your money, shouldn’t they? Don’t let upper management blame declining customer counts, sales, a catasrtophic stock drop, and bad customer experiences on poorly trained, under paid, hourly baristas. No other company holds the lowest common denominator accountable for the its financial collapse like Starbucks is trying to. Obviously I no longer go to Starbucks. I would hope that others that I share my story with will join me in boycotting Starbucks. But if you insist on going, try to work out a tips for coffee swap with your friendly hourly barista, so you’re not stuffing some hypocritical RM, DM, RVP or CEO with bonuses built in that are paid for by budget related terminations like mine.
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