Starbucks is continuing the reorganization of its US business by closing 600 underperforming stores and axing around 12,000 jobs. While this will provide a quick-fix solution to its current home business qualms, its plans to reignite the emotional attachment with consumers could have more long-term appeal in staving off the increasing threat from its fast food rivals.
Starbucks has revealed that by 2009 the company is to close 600 US stores and axe 12,000 jobs, almost 7% of its global workforce. The announcement follows on from the job cuts announced earlier in the year, when 600 non-store positions were cut.
The company blames the US economic slowdown for the job losses, stating that it intends to expand into foreign markets instead. For example, 150 new locations are planned in the UK, France and Germany over the next three years, as the company attempts to offset its poor home performance.
While rising food and fuel bills have prompted many consumers to miss out on their coffee fix, Starbucks has been blamed in part for causing its own fall by expanding too quickly and placing many stores too close to each other. In an attempt to address these past criticisms, the company plans to open just 200 US stores in 2009, 50 less than the initial target set for 2008.
Apart from economic slowdown, another main future concern for Starbucks is the rapid expansion of fast food coffee sales. Earlier in 2008, McDonald's announced plans to install coffee machines and baristas in all of its US stores in a bid to change its image from coffee novice to a major force in the coffee market.
While Starbucks is toying with the idea of introducing $1 coffee (and is testing the concept in its Seattle stores), its plans to reignite the emotional attachment with consumers appear to be a more likely way forward. The company has said that it aims to introduce a reward scheme, along with an online community for customers, while replacing coffee machines with versions that are shorter so that customers can watch baristas at work more effectively.
In addition, Starbucks plans to offer more health and wellness products to capitalize on the health trend, a strategy which has started with the introduction of new energy drink offerings in its stores.
While Starbucks is unlikely to disappear from cities soon, these new strategies should help it to retain some of the lost ground that it has experienced over the last year or so.