Starbucks Aids Mom and Pop Cafe’s?

Slate is reporting that many local mom and pop coffeehouses experience a boost in sales after a Starbucks opens up nearby. Starbucks is often credited with boosting the idea that sweet caffeine can cost $4.75 per cup and pervading society with the caffeine buzz mentality, but can a store next door really boost your profits?

So now that we know Starbucks isn’t slaughtering mom and pop, the thorny question remains: Why is Starbucks amplifying their business? It’s actually pretty simple. In contrast to so-called “downtown killers” like Home Depot or Wal-Mart, Starbucks doesn’t enjoy the kinds of competitive advantages that cut down its local rivals’ sales. Look at Wal-Mart. It offers lower prices and a wider array of goods than its small-town rivals, so it acts like a black hole on local consumers, sucking in virtually all of their business. Starbucks, on the other hand, is often more expensive than the local coffeehouse, and it offers a very limited menu; you’ll never see discounts or punch cards at Starbucks, nor will you see unique, localized fare (or—let’s be honest—fare that doesn’t make your tongue feel like it’s dying). In other words, a new Starbucks doesn’t prevent customers from visiting independents in the same way Wal-Mart does—especially since coffee addicts need a fix every day, yet they don’t always need to hit the same place for it. When Starbucks opens a store next to a mom and pop, it creates a sort of coffee nexus where people can go whenever they think “coffee.” Local consumers might have a formative experience with a Java Chip Frappuccino, but chances are they’ll branch out to the cheaper, less crowded, and often higher-quality independent cafe later on. So when Starbucks blitzed Omaha with six new stores in 2002, for instance, business at all coffeehouses in town immediately went up as much as 25 percent.

I am sure Starbucks would be disappointed to know that the brand image of Starbucks is essentially diluted down to any shop that can pull a good shot of espresso.  Our town has yet to be invaded by the Stabucks overlords but we do have our share of independents.  I work in a small college town which just had a new shop move in in an attempt to compete with the locally owned shop of 10 years.  If the addition of another coffehouse truely makes a “coffee nexus” than these two shops should coexist and benefit from the proximity.  Finally it is worth noting that the article isn’t based on an empirical study but anecdotes from various experiences in the coffee industry.

Slate: Don’t Fear Starbucks

img via Man in a Bowler Hat