Published June 01, 2012
Since opening its first store in Seattle's Pike Place Market in 1971, Starbucks has created over 17,000 stores in more than 55 countries. You would think that Starbucks, of all companies, has earned the right to rest on its laurels, but through perpetual innovation, Starbucks continues to restructure, innovate and expand. Small business owners, and aspiring entrepreneurs, can learn from Starbucks' ever-developing business model.
The Starbucks experience
You can buy a cup of coffee almost anywhere, but Starbucks grew to the powerhouse it is today because it didn't simply market coffee -- it marketed an experience and a lifestyle. The handcrafted beverages, music selections, fresh food, merchandise and comfortable couches all contribute to the overall experience.
Joe Duran, CEO of financial advisory firm United Capital Financial Partners, commented, "Starbucks can be considered to not be in the coffee business; they are in the business of creating a respite from everyday life for people."
People don't necessarily want your product -- they want the joy that will come from your product. Going to Starbucks is an event, something to do. Customers take in the ambiance. Getting coffee at the local convenience store is all about the coffee. Create a pleasurable environment for your customers and they might even come for the vibe even when they aren't thirsty.
Patience with customers
According to traditional thinking, allowing customers to hang around in your store for a few hours while only making one small purchase would be bad business practice. This would supposedly crowd your store and generate a low return on investment.
Howard Schultz, CEO of Starbucks, told Time magazine, "Consumer companies have a burden to provide real value and a compelling reason for a customer to be loyal." If you extend an olive branch to your consumer, they will reach for it. Don't treat the customer like all you care about is his or her wallet. Welcome them.
Know when to cut back and expand
Starbucks is known for its ubiquity. Nevertheless, when the late-2000s economic recession hit, the pervasive coffee chain had to shut down 600 stores nationwide. Even the seemingly invincible caffeine-giant had to cut losses, so you shouldn't be too proud to admit when a business venture doesn't go as planned.
Daniel Milstein, founder and CEO of Gold Star Mortgage Financial, commented that Starbucks and other companies that survived and thrived through the downturn "modified their operational policies and systems to address new regulations and other developments."
Closing under-performing stores saved Starbucks money, and thanks to cautious business tactics, Starbucks is now ready to expand once more, tripling its stores in China and opening six stores in Disney theme parks. Shrink and expand when it is opportune.
By 2015, Starbucks aims to serve only coffee grown and traded with ethical and responsible practices, use only cups that are reusable or recyclable and contribute one million volunteer hours to the communities it serves.
Schultz has spoken out in favor of corporate social responsibility and campaign spending reform. Commit your small business to fair practices, and your customers will thank you for it.
Since people can find their information in all kinds of new ways, Schultz insisted, "Companies can no longer talk at the consumer. You have to engage in a discussion and let people create, discover and share information and not just try to sell them things."
You shouldn't speak down to your customers or direct them into directions they don't want to go because it's popular at the moment.
Scott Spiewak, a PR professional with Fresh Impact, explained that small business owners often try to ebb and flow with trends, which can ultimately pull them away from their core clientele.
"Redefining who you are like Starbucks did," Spiewak said, "allowed them to rejuvenate their 'brand evangelists' and re-engage with customers on the ground who already support them."