An article in today's Spectator confirms that Starbucks will be opening a new store in the former Robert David store at 158 Locke St. S.
This will generate predictable howls of outrage from some quarters about how the big corporate store drive out independent businesses. My natural inclination is to concur (and I'm not a fan of Starbucks' coffee anyway) - except that the evidence decidedly runs against this assumption.
In an energetic article for Slate that turns this conventional wisdom on its head, Taylor Clark argues from evidence that Starbucks actually benefits the "mom and pop stores" in its vicinity by providing free advertising for the cafe experience and boosting baseline demand.
Strange as it sounds, the best way to boost sales at your independently owned coffeehouse may just be to have Starbucks move in next-door.
That's certainly how it worked out for [Herb] Hyman. Soon after declining Starbucks's buyout offer, Hyman received the expected news that the company was opening up next to one of his stores.
But instead of panicking, he decided to call his friend Jim Stewart, founder of the Seattle's Best Coffee chain, to find out what really happens when a Starbucks opens nearby. "You're going to love it," Stewart reported. "They'll do all of your marketing for you, and your sales will soar."
The prediction came true: Each new Starbucks store created a local buzz, drawing new converts to the latte-drinking fold. When the lines at Starbucks grew beyond the point of reason, these converts started venturing out—and, Look! There was another coffeehouse right next-door!
Articles like this can be long on anecdotes and short on hard evidence, but Clark makes a pretty compelling case that Starbucks is beneficial in the aggregate as well:
Here's a statistic that might be surprising, given the omnipresence of the Starbucks empire: According to recent figures from the Specialty Coffee Association of America, 57 percent of the nation's coffeehouses are still mom and pops.
Just over the five-year period from 2000 to 2005—long after Starbucks supposedly obliterated indie cafes—the number of mom and pops grew 40 percent, from 9,800 to nearly 14,000 coffeehouses. (Starbucks, I might add, tripled in size over that same time period. Good times all around.) So much for the sharp decline in locally owned coffee shops.
Clark notes that this is certainly not Starbucks' intention.
Starbucks is actually trying to be ruthless in its store placements; it wants those independents out of the way, and it frequently succeeds at displacing them through other means, such as buying a mom and pop's lease or intimidating them into selling out. [emphasis added]
The reason for this "reverse jinx effect", Clark argues, is simple: Starbucks doesn't compete with local shops through economies of scale and predatory pricing - quite the opposite, as the chain is known for upscale pricing as well as a monolithic product line.
As a result, mom-and-pops can compete on both price and selection, offering complementary products and services that leverage the Starbucks buzz but do not compete directly. Between the stores, they can create a "coffee nexus" that grows the base market enough to support both businesses - especially with the strength of Starbucks' marketing muscle.
Last week, I bet an acquaintance that a new Starbucks on Locke will not drive the Bad Dog Cafe out of business by the end of 2008. I'm pretty confident that I will collect on that bet.
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