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Throughout the 1990s and 2000s, Starbucks expanded across the U.S. using a “cluster strategy,” opening stores in close proximity to one another. Starbucks believed this would help build its brand and showcase convenience for the customer—there would literally be a coffee shop on every corner.
By 2017, however, store density had reached a point that locations were “cannibalizing” each other by competing for the same customers. Starbucks saturation became a running joke, lampooned on an episode of The Simpsons and the subject of a headline in satirical newspaper The Onion: “New Starbucks Opens In Rest Room Of Existing Starbucks.”
Starbucks once dominated big cities—in 2015, for example, it had 220 locations in Manhattan, more than rivals like Dunkin, while in 2014 someone driving between Boston and Philadelphia would never be more than 10 miles from a Starbucks. However, as Nathaniel Meyersohn reports for CNN, it is now pulling back from that focus.
In September, the company announced it would close around 400 stores over the next year. The move is part of CEO Brian Niccol’s ongoing “Back to Starbucks” plan, designed to reinvigorate the ailing coffee giant amid years of declining sales.
According to Meyersohn, urban stores are being hardest hit: Starbucks will close 42 locations in New York, 20 in Los Angeles, and 15 in Chicago. In a statement, Starbucks said it “closed locations that were underperforming or unable to meet our brand standards.”
Meyersohn cites increased competition from smaller chains and local coffee shops as one reason for the closures. “Urban America has seen a dramatic increase in competitive coffee shop openings that eat away at the store’s volume,” said Arthur Rubinfeld, a former Starbucks executive who helped lead the brand’s growth in the 90s and 2010s. Closing some can help increase sales at the remaining locations, Rubinfeld said.
Starbucks’ closures can also spell opportunity for other coffee brands. The Canadian chain Good Earth Coffeehouse announced in October that it planned to take over several former Starbucks locations. Similarly, the New York Post reported last week that Luckin, the fast-growing Chinese chain, could take over some closing Starbucks locations in New York as it continues to expand into the U.S.
Read more on Starbucks anti-saturation strategy from CNNhere.
Photo by Sadie Coulter on Unsplash
