Starbucks is simply not what it used to be. The brand that was one of the pioneers of the notion of the brand experience is struggling to be relevant in a turbulent marketplace. The stock price is down and Howard Schultz is back at the helm, admitting that his company expanded too quickly, opening stores within no more than 100 metres of each other in many US cities and in major cities abroad. Now, Starbucks is pulling back, closing stores around the world and stooping to offering free refills in its UK stores — a concept that most customers would associate with mainstream brands like Howard Johnsons and IHOP — certainly not what one would expect of Starbucks.
Howard was the guy who legitimatized the $4 cup of coffee and took Starbucks to a special place in the lives of many consumers — a “third place.” Although he didn’t invent the notion, Schultz did take the concept of a third place from its academic roots and gave it a practical retail application.
It was an American urban sociologist named Ray Oldenburg who first coined the phrase “third place” back in the early 1970s. Oldenburg’s research demonstrated that certain commercial places, such as restaurants, bookstores, and bars, took on a special meaning for their customers, representing places to which they could retreat to unwind, relax and talk with friends and even strangers. This was a place that was neither home nor work, a place where customers just felt comfortable. Think of Cheers and the stereotypical English Pub.
Oldenburg’s original view of the “third place” was centered around association and sociability. In fact, the central role of the third place, as Oldenburg defined it, was to facilitate conversation, certainly with friends, but also with individuals who may not be known outside of the context of the particular restaurant or pub. In the early days, Howard Schultz succeeded in creating precisely this kind of atmosphere at Starbucks for millions of customers. We saw them all there, chatting with friends, reading magazines, working on History assignments with laptops open. But, the rapid expansion of recent years has served to move Starbucks away from this brand positioning.
The appeal of the Starbucks brand experience has changed. While it is still a place to meet friends for many customers, others in downtown business districts now see Starbucks is a place to grab a quick cup of coffee to take back to the office. There is no stopping to chat or sitting to read a newspaper. In fact, in many Starbucks locations in the basements of office towers, there is nowhere to sit. Others now see Starbucks as a drive-thru — a concept historically associated with Dairy Queen and McDonald’s. Ordering a Caramel Macchiato from the window of your car just doesn’t seem to have the same cachet.
The Starbucks experience is just not the same when it involves picking up a coffee from a drive-thru window. Where is the “third placedness” in that? Is coffee still worth $4 a cup when you are drinking it in the privacy of your own office cubicle? Without the convivial atmosphere of the original Starbucks, it’s just not a third place any more. The brand has lost some of its value for millions of loyal customers. The challenge that Howard is facing is one of getting back the value that those millions had associated with the Starbucks brand. I’d close the drive-thrus first.