Why Did Starbucks Cross the Road?

Yangming Liu, Laura Lukowski, Mark Longfellow, Anthony Marcello

How Many Stores Are There?• As of November 2006:

– 7,102 company-operated outlets worldwide

• 5,668 in United States• 1,434 in other countries

– 5,338 joint-venture and licensed outlets

• 3,168 in United States• 2,170 in other countries

– Total worldwide: 12,440 Beijing, China

Why So Many Starbucks?

• Long lines cause customers to leave

• Several stores in one area reduce long lines

• First discovered in Vancouver, 1990

Why So Many Starbucks?

• Customers do not want to travel far for coffee• Will travel only a few minutes, 6-8 min. max• Location matters: across the street or around a

bend in the road• A new store may take away sales from original,

but will increase total sales overall

Why So Many Starbucks?

• Demand for specialty coffee is growing fast

• Adding stores only to keep up with demand

• Majority of Starbuck’s profits come from opening new stores in same area that has high demand

Why So Many Starbucks?

• To capture spur-of-the-moment customers

• If a customer sees a store nearby, may buy a cup of coffee even if they were not planning on it

• Maintaining growth is key to keeping stocks high

• Opening new stores nearby is retail equivalent of basketball’s boxing out

Expansion of Locations

Expansion of Locations

• Multiple size designs– Floor plans vary greatly in square footage– Small designs of 250 square feet (small

stands inside bookstores, gas stations, or hotel lobbies)

– Large designs of 1,600 square feet (typical size of a stand alone location)

– Allows new stores in a wide variety of locations

Expansion of Locations

• Closely study real estate trends• Large part of sales is dependent on spur-

of-the-moment purchases• Build in high traffic areas (malls, theaters,

hotels, etc.)• Customer work schedules

Starbuck’s Décor

• Arthur Rubinfeld– executive of real

estate• 80% of design was

standard issue• Focus on what

costumers see

Starbuck’s Décor

• Stained wood front, plastic in back

• Dark color ceilings• Regular floors• Curtains and

murals

• Sofas and soft chairs

• Round tables• Every store is

unique

Maintaining Interest

• Added drive-thru in 2004• Customized buildings for customers• New stores on major highways and in

smaller towns• Additional bathrooms for travelers

Future Plans

• Open 10,000 new stores in next 4 years

• Open stores in lower-income, more diverse communities

Questions?