Starbucks Woes
Starbucks has been rapidly expanding in the Philippines, they are almost in every mall you could think of. While I love going into Starbucks to buy coffee and sit in their trendy shops with my friends chatting away for hours on end, they should take notice about the plight of Starbucks coffee shops in the US and the UK. They are dead last in an independent UK taste test of the main coffee chains and their shares have dropped to a whopping 40% over the past year and has forced it’s founder, Howard Schultz to return to helm the chief executive to rebound from this devastating loss. In the US, while the current sub prime crisis and the wider slowdown in consumer spending in the US has greatly affected sales, coffee analysts say the problems at the company run much deeper.
Business analyst has concluded where Starbucks has gone wrong, it now has too many outlets in the US and the UK, which is cannibalizing sales between branches only a short distance from each other. With Starbucks aggressive expansion in the early years, It was all but inevitable that their sales would eventually fall and stagnate. The major problem for Starbucks is that its stellar expansion of the past decade has tarnished the exclusive, upmarket image that made it so popular in the first place. Meaning that if Starbucks continued it’s unabated expansion, it will also loose it’s upscale image that made it so appealing for Filipinos. Market saturation in the US market has changed how Starbucks is viewed there, with many consumers now mentioning it in the same breath as McDonald’s and Burger King.
Starbucks had such a great concept of delicious, quality coffees and excellent upscale store ambiance, but it was also of course such an easy idea to copy. With lots of trendy coffee shops like Figaro and Coffee Bean & Tea Leaf duking it out for our money, customer loyalty and image is very important in the coffee shop business. While there is certainly room left for Starbucks continued expansion here in the Philippines, they should carefully analyze the problems of overly saturating the market as clearly evidenced by the current problems Starbucks is experiencing in the US and UK market.
