Retailing is a major economic driver and an important societal influence on the way we live and how our cities operate.
It’s also in the midst of upheaval that no one is certain will end and its most important season of the financial year is just weeks away
Given all that, it’s worth checking in on the latest news, developments and trends involving a regionally based company that is one of the biggest influencers in retail.
No, not that company. The other one.
While it’s easy to think of Starbucks as a coffee purveyor, placed firmly in the realm of restaurants, it has a huge presence in retailing, both for its own heft and its impact on other retail establishments and on retailing real estate.
At a recent trade show for a separate sector, an independent Washington retailer was lamenting the impact on foot traffic when a nearby Starbucks outlet closed.
Like that other mammoth regionally based retailer, Starbucks owes a considerable share of its success to a willingness to experiment and to defy conventional wisdom.
Charge premium prices for a commodity product? Just watch us. Put two of your own stores across the street from one another? Sure! Put them inside grocery stores like Safeway, even if you’ve got a freestanding store nearby? Why not. Drive-through lanes? But of course. Sell your products on grocery shelves for home consumption? We’re on it!
The breadth and depth of change at Starbucks makes for interesting times for competitors, which face decisions about chasing or imitating the giant or somehow counter-programming against it.
But what’s also fascinating to watch for everyone in retailing is not just the experiments that grow into new lines of business but the ventures on which the company pulls the plug.
That’s happened twice in recent weeks with Starbucks.
First, the company announced it is closing its 379 Teavana stores (local locations include the Tacoma and Southcenter malls.) The company will continue selling that brand of teas in its Starbucks outlets.
“Many of our Teavana mall-based stores have been persistently underperforming,” Chief Executive Kevin Johnson said on a conference call with investment analysts in July.
“We conducted a strategic review of the Teavana mall-based store business and concluded that despite our efforts to reverse the trend through creative merchandising and new store designs, the underperformance was likely to continue.”
This isn’t what mall properties needed to hear right now, struggling as they are with store closings by so many national retail chains.
One more departure not only eliminates whatever lease revenue that tenant was generating, it also removes one more draw of customers to that mall property. That affects foot traffic at other stores, which prompts more closures, and on spins the vicious cycle.
(In an earlier quarterly call in which executives warned Teavana’s future was under review, they also noted that “because Starbucks is a customer destination, profitability in our Starbucks mall store has largely been unaffected.”)
Mall owners are furiously rethinking the types of tenants they put in their properties. It’s no shock that some of the proposals for that other company’s second headquarters involve repurposing malls that couldn’t make a transition and closed.
A major factor in the woes of mall operators is online retailing, a segment of the business that Starbucks, interestingly enough, just pulled out of.
The other move Starbucks made this month was to turn out the lights on its online store as of Oct. 1. Many of the items, such as packaged coffee, tea and accessories, are still available in Starbucks stores.
That, in fact, seems to be the point.
Starbucks talks a lot about the need to integrate digital technology into what it does, but in its definition digital means ease of ordering and payment, and as a channel to offer deals and reward frequent shoppers. It does not include online shopping.
Chairman Howard Schultz described it thusly in that earlier conference call: “Every retailer that is going to win in this new environment must become an experiential destination. Your products and services for the most part cannot be available online and cannot be available on (name of that other online retailer here.)”
That’s a bold move, especially in an era in which the extinction of the physical store is proclaimed daily. It’s likely to give palpitations to retailers wondering whether they need to be imitating Starbucks again.
Perhaps giving up online won’t matter to Starbucks, given its near ubiquitous physical presence through which to sell stuff. Can others without that prominence or reach afford to copy it?
So here you have Starbucks signaling that bricks-and-mortar retailing is core to its existence and success, even as it also signals that one particular type of bricks-and-mortar retailing no longer works for it.
The strategy may work, or Starbucks could pivot tomorrow to some other model that will bring people in and sustain growth.
We’ll learn a lot about consumers and retailing by paying attention not only to what a company such as Starbuck does but also to what it undoes.
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at email@example.com.