Starbucks: fighting a land war in Asia

When a person adapts to the times, they’re seen as progressive… becoming more “highly evolved”. When a company whose brand is as highly evolved as Starbucks adapts to the times, they run the risk of appearing shifty. That’s what Starbucks is facing, as has been widely reported in the press and blogosphere. At issue is what the Huffington Post called “going undercover”.

Signage reminiscent of "You've Got Mail" and Fox Books

Signage reminiscent of "You've Got Mail" and Fox Books

It’s amusing, really. It reminds me of the David and Goliath story in You’ve Got Mail … right down to the signage Starbucks put up… does it remind you of that cute “Fox Books coming around the corner” sign, preparing to steamroll its tiny competitor, the “Shop around the corner”?

Starbucks came out today with a fact sheet to try and defuse the controversy, but the original charges still stand: Starbucks has been ham-handed in its approach to this situation. Here are the red flags that strike me:

  • Authentically local stores have described lengthy visits by Starbucks personnel who carried notebooks labeled “Observation”
  • The store right next to the 15th Ave shop has had many of its design details copied by Starbucks: wall colors, light fixtures, similar salvaged wood and framed chalkboards, similar used theatre seats in the serving area
  • Door of the remodeled Starbucks

    Door of the remodeled Starbucks

    The new store sign on the door says it was “inspired by Starbucks”. Is this true? Isn’t it more accurate to say that it was inspired by Smith, and is actually attempting to distance itself from Starbucks by the decor change, by a shift in the technology of drink production, and by the elimination of Starbucks labeling from the equipment and bags of coffee and tea? After all, don’t those bags contain the same coffee and tea that other stores get, with the Starbucks brand? It really does smack of deception.

I like the idea suggested by Matt Whiting in his paragraph about transparency: compromise by calling it “15th Ave. Coffee and Tea: your Neighborhood Starbucks.” And I would add, don’t give the appearance of deception by removing Starbucks logos from the coffee and tea bags. Take away the branding shell game, and then Starbucks is simply updating its store decor, which now becomes a virtue and a sign of sensitivity to the wishes of its customers.

So I agree with the sentiments of those who feel that the new Starbucks experiment is a good idea … a realization that the goal of being truly accessible, local and organic implies a fresh approach. Maybe even a new “unbranded” brand if it can be done without getting sneaky.

But here’s the rub: I’ve never seen a high-value brand maintain its value long-term after scaling upThe Limited gave way to Express which lost its upscale standing to a host of small competitors. Abercrombie needs its Hollister foil to keep its brand value high… Nordstrom has developed great customer service as its hedgehog concept, but it’s engaged in one of those Asian land wars now, too. (A big part of this is simply the plate tectonics of aging demo groups, too.)

Upscale panache downscales in perceived quality and value when it goes mainstream, and Starbucks has lasted longer than most. Starbucks is 1000 times more substantive than Beanie Babies, but there might be more of a similarity in the trajectory of those two brands than we care to admit. Ultimately we’re dealing with the law of supply and demand. Supply increases, demand drops. That’s why every city that has a community at its core can support 6 local one-up coffee shops better than it can support half a dozen Starbucks stores. Maybe that’s why Jim Collins writes, “Great companies do not necessarily have innovation as a central part of their vision or strategy.”

In my own industry, video production, I’ve seen lots of fads and lots of factories. I’ve seen them grow and gain market share, and prosper — for a while — by cranking out special effects and creative approaches that are markedly similar from project to project. I’ve seen these shops build their staff around specialties: camera guys, editors, 3D animators. They buy a gizmo; it cost a lot; so by golly, they’re going to use it. Creativity gets redefined from what works to what’s au courant. Remember morphs? Spins? Marquee Effects? Page turns? Remember Cranston/Csuri Productions, which lasted 7 years doing slick network animations when you could charge $1000/second for cranking them out? Yes, some of these skills require some specialization, but when you bring devotees into a room to decide on the approach, each fights for his own specialty. And the result might be efficient and it may even be truly creative … But in my experience it’s not a creativity that is harnessed to the customer’s needs, but to the production company’s internal dynamic of “the state of the art”.

Actually I think the YouTube phenomenon is a backlash against such slick communication-by-committee. It’s not that people don’t like good production values. YouTube video quality is getting better and better. What got lost was the truly unexpected, the honestly authentic, expressions of individuality; and everyone loves to see that when it happens. Along with the lower cost of entry, I think the desire for authenticity is the biggest reason why today’s best work is done by small shops and by agencies such as The Martin Agency which delegate lots of creative power to individuals in a horizontal, non-specialized community of thinkers.

Starbucks is a great company which may succeed as it adds food, alcohol, and more neighborhood individuality to its impressive quality brand. If it can keep providing health care costs for its part-time workers (and if good health care coverage remains in short supply), I think the company can continue to retain great people who attract loyal customers. (John Moore has much wisdom to offer as an observer of Starbucks.)

On the other hand, the difficulty of truly scaling creativity makes Vizzini’s joke relevant, it seems to me. A big company can compete because of economies of scale, and a small 3-store chain can compete because it has no scale. All its decisions are individual. One good, in-touch entrepreneur can feel what needs to happen in a neighborhood … and the individuality of such a person can out-maneuver an army of junior managers carrying “Observation” notebooks.

So while I agree that Starbucks “gets it” that unique, neighborhood stores are what people want, and wise in its desire to deliver a truly local experience store by store, I also sympathize with those who were offended by their execution of the plan.

Imitation is not creation, and hiding a brand does not change its fundamental identity. Those are classic blunders, along with fighting a land war in Asia.

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Starbucks startup

So did Starbucks set out to create a brand via advertising, marketing, persuasion?

Here’s what John Moore, their marketing guy during the startup years has to say:

His point: building the business created the brand. No doubt Starbucks had a clearly defined graphic strategy, did advertising, all of that. Any organization needs to do those things. But the perceptions in the minds of the consumers were formed, not from the persuasive speech, the Starbucks advertising … but from the actual experience of committed Starbucks people delivering excellent products in an environment that was carefully designed to be a “third place” in the customers’ lives.

That’s what I mean by brand authenticity.