Thursday morning I met up with my friend James who runs some local restaurants here in Seattle. He suggested that we meet up on 15th Avenue at the “Starbucks that isn’t a Starbucks.” I had no idea what he was talking about, but I agreed and there we met.
When you walk in to the 15th Avenue Coffee and Tea shop, it feels like something you might find in Berkeley. All of the furniture is old “found” objects, old wooden theater chairs, a door that has been turned into a table top, big cartoon outlets painted on the walls with arrows pointing down, indicating where the real outlets are. Pages from books paper the walls, there are little trays of spices you can pinch and add to your beverage. And up on the shelves there is an assortment of beer and wine choices. It was great.
So it’s the opposite of a Starbucks, but it’s a Starbucks, even though it’s not called a Starbucks?
Yep.
I wondered if this was a way for them to remain a big business, with their cookie cutter format that we all know, while at the same time be a small business with a series of one-off places like 15th Ave (I learned there is at least one more of these shops, that also bears the address of that location – I think it’s on Boren street)? Sort of a brand hedge to be big and small at the same time?
Nope.
After some investigation (one of the benefits of Seattle really being a tiny town despite being the 14th largest market in the US according to my friend Jill), I learned what Starbucks is doing, and why. And it’s great rethinking on their part.
By definition every company has a loss leader, and it turns out 15th Ave was just that for Starbucks, as was the one on Boren. So instead of bailing out of the location, trusting that location isn’t the problem, Starbucks has decided to turn these stores into experiments of what people will respond to in the form or format changes. Since it’s a fact that Starbucks is the #1 place in the world for first dates for some obvious reasons (cheap, can be quick if necessary, etc.), I think adding beer and wine is a great way to extend the day at Starbucks, it might change what some of those people order on first dates.
But testing lots of different “how” they do things Starbucks does “what” they do will learn a ton about where people want changes in Starbucks and I expect this experiment will continue in various forms for many years because it’s such a smart way to “listen” to customers in terms of what they want and value.
-Ric
P.S. Looking to the opposite of the spectrum, let me know if you want to know where the highest grossing Starbucks in the world is. Ric at ricmerrifield dot com.
Interesting, but normally one of the main reasons to have a loss leader is to increase brand awareness, no? They’ve totally changed their branding here from your description.
It certainly provides a lab for testing new ideas, but are the dynamics of branding and the target demographic so changed that what works in the lab will likely not work in the traditional stores?
I wonder if this store evolved into its present form over time, or was the result of massive, sudden change?
Josh Nankivel
pmstudent.com
Good clarification.
A lot of companies have a product that’s a loss leader, like The Home Depot sells sheet rock at cost, to draw in customers, assuming they will buy more.
Somewhat ironically, food is often the loss leader in restaurants.
In the case I mentioned with Starbucks, they are identifying underperforming stores, so I probably shouldn’t have called them loss leaders.