Why Rapid Expansion Isn't Always a Good Thing - Business Lessons to Be Learned from Starbucks

Starbucks recently announced that it would be laying off 7% of its workforce and closing 600 stores. While the slowing economy is partially to blame, Starbucks seems not to have learned the lesson of its other fast food brethren as it tried to build its coffee empire. What follows are some of the issues that Starbucks created for itself in the past several years.

PEOPLE DON'T WANT A DILUTED EXPERIENCE ANYMORE THAN THEY WANT DILUTED COFFEE

In Jeffersontown, Kentucky, near where I live, there is a Starbucks store. If for some reason you don't want to visit that one, you can drive across the street to Target where Starbucks has conveniently opened another store. Still, this isn't as bad as the story I read a few years ago that indicated Starbucks opened two stores across from each other in a mall. While Starbucks certainly gained some sales from being on every corner, it also ruined the mystique of visiting a Starbucks. Before they rapidly expanded, Starbucks could be seen as a neat coffee house that happened to be a part of a large corporation. When they started popping up everywhere, it simply became another cookie cutter chain out to suck money out of your wallet. Another problem with the number of stores is that Starbucks wasn't able to hire to the same standards that it used to. In my experience, some of the newer stores were populated with less than friendly teenagers who didn't provide the experience you were used to with Starbucks. Starbucks began to feel more like the McDonalds of coffee than a nice coffeehouse.

YEAH, IT SAYS STARBUCKS, BUT IT TASTES LIKE DAY OLD FOLGERS

The Starbucks brand is a powerful one, and to many it symbolized great coffee. Unfortunately, Starbucks decided its name needed to go everywhere coffee was sold, from prepackaged sludgy sweet drinks to any restaurant or coffee service that wanted to use its coffee. With every lame product and bad cup of coffee, Starbucks helped sully the brand. Those that loved it weren't necessarily thrilled with the other products and those that first tried Starbucks through one of these less than stellar extensions probably had to wonder what the fuss was about.

DAVE NEVER HAS A SECOND CUP. SO WHY IS HE ACROSS THE STREET?

Every business has a sweet spot in terms of expansion. Stores should be plentiful enough to ensure you maximize your return on investment, but not so plentiful that the store you opened three weeks ago takes 50% of your customers from the one you opened two years ago. If Starbucks had simply looked at the fast food industry, they could turn to the examples of McDonalds, Burger King, and others to see how sales get cannibalized when you expand recklessly.

THE MORE VENTI THE CUP, THE LARGER THE SPILL

In its rise to the nation's top retailer, Wal-Mart went from a beloved company devoted to American values to a hated behemoth selling cheap junk from a half a world away. While Starbucks has worked hard to maintain corporate responsibility, its sheer size has offended the people it can least afford to offend, coffee lovers. In a recent Reuters article, several coffee drinkers expressed great delight at Starbucks woes, expressing their dislike for Starbucks coffee, its methods, and its lack of personality. By closing stores and laying off workers, Starbucks completes the circle it started long ago, moving from funky coffee house to another cog in the corporate wheel.