It is safe to say that Howard Schultz, the chairman of Starbucks, is turning up the heat in the coffee market.
He recently closed his 7,100 stores for over three hours for one evening to retrain his employees. The core of his company’s success has always been the barista, the person preparing your custom coffee drink. Ever since Schultz visited Italy in the early days when he was developing his vision for Starbucks, he knew that the barista would be critical to its success.
In recent years, Starbucks has been losing market share to national, regional and local coffee houses and even McDonald’s. In response, Starbucks added salads, sandwiches, music and books to their product offerings. With all of these additions, it is possible that they have stayed from their core competency, making the best cup of coffee in the world.
The actions taken by Schultz demonstrate that he believes that they have strayed. The media, both print- and Internet-based, devoted a great deal of time covering the re-training event. Consider that over 100,000 employees were retrained by their managers on how to draw the perfect shot of coffee for the customer.
The subtext of this decision is that customer satisfaction drives their business. Following the evening of training, I visited a local Starbucks and experienced two things. First, I was greeted with a renewed energy by the employees and second, the barista drew two shoots until he was satisfied with the preparation of my coffee beverage.
Has American Airlines ever stopped flying for three hours to retrain all of their gate agents and flight attendants? Has Macy’s ever closed its doors for three hours and retrained all their sales associates on proper customer service?
The answers to both these questions is a resounding “no.” The question then is, why not?
Starbucks has made an investment in its future by reinforcing the cores of its company culture, customer service and product differentiation. The barista is their core differentiator, and if they are not functioning at 100 percent, then Starbucks is just another coffee shop. When you charge premium prices, you need to provide a premium product delivered by a friendly and accomplished barista.
In my early years of retailing in New York, a little known store on the east side of Manhattan emerged from the shadows to lead retailing into the 1970s. Bloomingdales, under the leadership of its chairman, Marvin Traub, moved from being just another retailer to the fashion leader in the industry.
What did Traub do that was so different? He made retailing fun and exciting for his associates and especially his customers. Fashion shows, music, new designers like Ralph Lauren, Tommy Hilfiger and others were given their own boutiques to show their fashions. Displays were constantly changed; the furniture floor was organized in such a manner that you could see an entire room set with drapes, china, carpets and other accessories. Customers were dazzled with fashionably dressed sales associates eager to serve. He had orchestrated an atmosphere similar to a Broadway show. Suddenly, Bloomingdales was not a department store but a destination to shop, meet, greet and eat.
A dining car from a French train was added to the seventh floor and transformed into a restaurant. Excitement permeated the entire organization as their suburban stores were renovated to mirror the successful elements of the New York operation.
These changes instituted by Traub changed an industry, not only a single store. Macy’s followed by opening the Cellar, their specialty foods operation. Nordstrom’s went from being a stale shoe store to a national premium retailer. The whole industry was reinvented.
So what do we learn from these power retailers? Focus on what makes you different and unique and you will be successful. Howard Schultz built his coffee empire around the barista and now is refocusing on the one thing that will continue to differentiate Starbucks from the competition.
As many companies grow, they lose their focus on what made them successful. They lose touch with the customer, the foundation of their success. Coffee roasting was the core of Starbucks’ business when they started. The coffee drinks, the music and the pastry were added because the customer desired it. The coffee cups, the coffee makers and the other accessories were concentric diversification, the music enhanced the environment and the pastry was a perfect complement to the coffee experience.
Starbucks needs to reexamine the salads, the sandwiches and the other products being offered that do not support the coffee experience. Bringing the coffee preparation experience back to the forefront of the transaction is the key to reenergizing Starbucks. When the coffee beverage is no longer premium, then nor can be the price. That is when customers abandon the barista for the Golden Arches of McDonald’s.
Is it time that you revisit the roots of your business and refocus on what made you successful in the first place? Have you gravitated away from your core competencies and allowed the competition to enter your markets?
Now is the time to answer those questions. With the economy in neutral, you need to concentrate on maintaining your existing client base, while finding ways to add new business. Talk to your current clients. Ask them how you can better serve their needs.
You want to mine your existing base and solidify your position as their preferred provider of a service or product. This will provide you with a strong foundation from which to grow your business when the economy heats up.
Starbucks is solidifying their base of customers by returning to basics, the perfect cup of coffee. As Tom Grimes, the last chairman of Gimbels Midwest used to say, they realize that they have permitted the competition to “eat their lunch.”
It is time to close the counter to the competition and stop serving a free lunch.
