Along With The Aroma Of Freshly Roasted Coffee Beans, A Part of Starbucks Luster Disappeared. An Idea in Crisis.
Dipl. Soz. Maximiliana Schürrle

Howard Schultz, Starbucks Chairman, took the bull by the horns when he saw that Starbucks stock price was continually dropping, even though profits had risen by 22 percent and net profit amounted to 600 million dollar during the business year 2005/2006. The company has developed globally at a breathtaking speed. Yet, head of the executive board Schultz complains that this rapid global expansion takes place at the expense of “the romance and theatre from the stores”. The sensational business success of the Starbucks idea to brew freshly roasted coffee and serve it in comforting atmosphere, is reaching its limits. A “Premium Standard” cannot be expanded arbitrarily. Howard Schultz is speaking of “watering down” the Starbucks image. Starbucks built a world of indulgence through the brand which had been able for a long time to convince the customer that they stand for the ideal world of a traditional coffee house. Such a world cannot be maintained in a chain with 10,000 shops and the goal of becoming an empire with 40,000 shops. At this point, Starbucks turns into a mass product. He, who industrializes the intimacy of a coffee house, kills it. And if Howard Schultz now publicly in front of his fans tells his management that it’s time to revive the past, the history, the tradition and passion from the period of foundation, he knows very well that this is not possible. Global growth forces compromises. Surely, part of these compromises is the conversion to automated coffee machines. This way the customer gets his coffee quicker. But is that what he really wants, if he decided to drink his coffee at Starbucks and enjoy his coffee in a coffee house atmosphere? What was originally unique about Starbucks is more or less dead. There is no such thing as forty-thousandfold uniqueness. Howard Schultz puts it this way: “We have lost the original qualities as the company has sought to increase scale, efficiency and return on investment.”

It may well be that Howard Schultz wrote this letter fair and square to his management. However, he knows full well that one cannot turn back the clock. When brand and product part ways they both will eventually not make the grade. We can only hope that Howard Schultz and the company Starbucks are going to rediscover the original idea and the soul of the business again.

Personally Managed Retail Is Experiencing Global Revival
Franz M. Schmid-Preissler

Surely, retail as we know it from the 19th and first half of the 20th century is more or less dead. Globally! The so-called “general store” or “Mom and Pop store”, basically the store that offers anything a person needs for daily life, is obsolete. Size does not really play a role here. The department store, the big general store and the mail-order establishment with its two and a half inch catalogues are also obsolete, just as much as the colonial goods store, whose smell of a mixture of barrelled sauerkraut und freshly roasted coffee is still lingering on in our memories from childhood days.

In a way, retail is regressing. Centuries ago, when “market” still meant a central square in towns or villages, where trade offered not a large but a very specific assortment. At farmer’s markets around the globe, this is still the case today. The farmer’s wife is there with geese and vegetables from her own garden. There is a baker with his bread and a hawker with spices or simple textiles. Specialization dominates the scene. And exactly this specialization is the revival I speak of and which is rekindling the personally managed retail store; whereas the brand plays the decisive role here.

The franchise principle is the breeding ground where the renaissance of the personally managed retail is blossoming, globally and in all industries. From McDonald’s at major highways all the way to luxury brands of the fashion industry in the new “shopping-world-of-experience” at the airports of Dubai, London and at factory outlets, in economic hotspots and their surrounding areas. In the country and in small towns, where vertical distribution of the manufacturers does not directly reach the client.

This development is not confined to consumer goods retail. Machine manufacturers, classic B2B-structures, tools and construction materials, insurance companies and cars, just to name a few examples, are marketed today on site in partnership structures with shared risk and shared chance of winning, between producers and vendor.

That this new old form of doing retail blossoms mostly in Premium, PremiumEconomy and Luxury segments of the markets does not turn it into niche existence. Quite contrary, these segments are the big segments of the future, because the Economy segment, meaning the segment that is mostly ruled by price, is losing in importance, because problem solution and service are once again in demand and because the brand becomes more and more important as value guarantee.

Franchising as basis for the personally managed retail is a win-win situation for all involved. Professional marketing, cost-efficient communications processes, working with experienced partners, create an edge for the retailer compared to his colleagues working the conventional way. And all this without having to give up values entrenched in autonomy. The manufacturer has someone “independent” in his franchise system, a partner shaped by the entrepreneurial idea. This new old form of retail appeals to consumers.

The future belongs to the market oriented specialization in a personally managed retail store. A future, that has begun already. Manufacturers and retail should accelerate the market oriented specialization and further advancement should be promoted wherever it is feasible and practicable. Personally managed retail can offer the best possible service in regards to and optimal customer service.