Starbucks Coffee losing steam in Puerto Rico

Starbucks Coffee losing steam in Puerto RicoEither our economy is much worse than anyone is actually saying or Starbucks Coffee is guilty of over-zealous expansion, because this week they announced that they would be closing three stores. According to a report from the Forbes web site, the stores will be closed in June, and all of the employees would be transferred to other stores.

Although the Chicken Little in me wants to say it's the former, I have to be honest and say that it's probably a little bit of both. As I've said before, Starbucks growth in Puerto Rico has been surprising for many people, but of course, if you've traveled to any major city in the Unites States it isn't that much of a surprise. In the heart of most cities like New York, Boston, or Portland, you'll commonly find what seems like a Starbucks on every other corner. Of course, much like when I predicted that Macy's wouldn't do well here in Puerto Rico, what people missed is that it was never about the coffee (just as I missed that Macy's was never about their merchandise). What Starbucks offered was a unique experience unmatched in the marketplace. It made you feel special when you finally figured out how to order what you wanted; you joined an exclusive group that made you feel superior to those that were clueless (just as some believe when they are walking around with a Macy's bag in their hand).

According to Starbucks spokesman in Puerto Rico, Adolfo Santana, the stores struggled financially because they were too close to other Starbucks locations. There's probably some truth to that, but I think when Outback, Ruby Tuesdays, and TGIFridays are also closing stores, the poor economy has to be equally responsible. The conclusion: for this market Starbucks may have reached its limit, especially in the San Juan metroplex.

What will be curious to see is if they continue with plans to open additional stores in other locations. If you check our map of Starbucks locations, there are at least three locations that I would open if I were Starbucks. The locations, in this order of priority, are: Mayagüez, Ponce, and Aguadilla or Arecibo.

Flickr Creative Commons Contributor: hlkljgk

4 comments:

Gabriel

1 de julio de 2008, 15:58
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dijo...

They are probably devastated. I saw a plan that said they could support more than 28 stores in the island. Maybe they could go to the small kiosk like they have every 50 meters (it seems) in DC.

MC Don Dees

1 de julio de 2008, 20:40
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dijo...

I think they might be able to if they expand throughout the island, but maybe that might increase their expenses in keeping the stores stocked. There's a certain efficiency to having a thousand stores within a mile of each other. However, that efficiency comes at the expense of profitability, which explains the closings.

Gabriel

2 de julio de 2008, 03:58
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dijo...

Yeah, like the way Walgreens sees a store that makes, say 10 million and they decide to open another nearby so they have two 6 million stores. One or two in Mayaguez and Ponce may thrive near colleges.
The trick with placing the stores here is the poorly designed urban landscapes we have. Nobody walks to or from work or to stores. People drive everywhere so instead of an impulse drink, its a destination. And if its a destination it means they will go for a meeting or the wifi and buy something just as a tax to sit down. Probably why they took off most electrical plugs, to get people moving.

MC Don Dees

2 de julio de 2008, 05:18
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dijo...

Man Gabriel, that's an excellent point. Good one. I wonder what other implications that observation has? That is, besides contributing to the high percentage of obesity on the island, I mean I know it's hot and everything but what's the huge aversion to walking?

I've gotten to the point now that I pretty much take the first parking spot I see, saves gas, saves time, keeps me healthier. Ironically enough those same fat bastards that didn't want to walk when they are young end up having to walk when their heart starts giving them problems. Go figure...