Starbucks, a coffee chain, is experiencing two dislocations: lockdown might have changed people’s coffee-drinking habit, and lack of drive-thru in its stores may be discouraging patrons from visiting, over social distancing. So, some people were indoors for weeks and were able to go through the hibernation without Starbucks, saving about $6 per cup of coffee during any indulgence encounter. Now that the lockdown is over, not many people want to restart that lifestyle again.
Also, for the few people who are interested in going, they would prefer a drive-thru over entering the store. Starbucks does not have many stores with drive-thrus, and that is hurting it right now. The implication is that the company is closing stores as sales plummet, even when some competitors are seeing improving growth. Of course, the premium nature of Starbucks (yes, it is expensive) could be a major factor why it is struggling. During recession, expensive coffee drinking habits become secondary to most people, who are trying to just survive before normalcy returns!
Can Starbucks, the world’s biggest coffee chain, come through the pandemic as that “third place,” away from home and work, where customers can relax? The company — which expects to lose $3.2 billion this quarter and close 400 stores over the next 18 months — says it’s accelerating its pivot to pickup only. With higher prices and fewer drive-thrus than some competitors, the chain has been hard hit by the coronavirus’ impact on commuting, the economy and socially acceptable distancing.
This pandemic will change markets because it has actually changed customers. Some sectors will witness massive erosion of value. Nothing will be the same. Those that continue to do well are companies with clear double play within domains which are essential to customers. They also need to adjust to serve new evolving frictions for their customers. Who knows that lack of drive-thrus will come to hurt Starbucks!
This is the deal: check if your customers’ frictions have evolved. The lockdown was a pilot and many customers may not return to the old ways.
1. Advance your career with Tekedia Mini-MBA (Sept 13 – Dec 6, 2021): 140 global faculty, online, self-paced, $140 (or N50,000 naira). Click and register here.
2. Click to join Tekedia Capital Syndicate and own a piece of Africa’s finest startups with a minimum of $10,000 investment.