Why Starbucks lost its mojo
It became too common to be trendy – and lost its appeal.
Philadelphia — Bad news has been pouring down on Starbucks for a year.
The price of the company's stock has been cut in half – and then some. Fewer people come through store doors and those who do buy less.
Still when Starbucks, that longtime engine of growth, announced that it planned to close 600 US stores – 50 of them by the end of July – and lay off 12,000 employees, company watchers reacted with surprise. One journalist called it the "sudden shocking end to the long and gilded age of Starbucks."
As the shock wore off, the explanations came. Pundits and analysts blamed stock prices, the mortgage crisis, competition from McDonald's and Dunkin Donuts, along with real estate blunders, like putting stores on opposite corners of the same intersection. But they had it mostly wrong. This economic logic was too narrow and not culturally informed enough to explain Starbucks' fall.
The company thrived throughout the past 15 years by giving middle-class Americans exactly what they thought they wanted – and this wasn't really about coffee. It was about creating a product that allowed doctors and lawyers, IT specialists and travel writers, and then their imitators, to portray themselves as they wanted to be seen. That's how products work in the world we live in. We buy things to announce something about ourselves.
For the most part, the products that sell the best are the ones that communicate most effectively. That's what Starbucks did with their coffee.
Really, then, they sold not coffee but elevated status. Just by buying the coffee and speaking the company's made-up lingua franca, you became a cup-carrying member of the upper class. And that made Starbucks, overpriced as it was, an affordable form of statusmaking.
It was, after all, cheaper than a BMW, a Kate Spade bag, an Armani suit, or a Colorado ski vacation, but it projected "upscale" in the same way. That's why it was valuable, maybe even a bargain at $4 a cup.
I once asked a woman who graduated from community college and worked as a dental hygienist why she went to Starbucks several times a week; she answered, "I don't really like the coffee, but I go because successful people go there and I hope it rubs off on me."
This was not a phenomenon unique to the United States. I once talked with a 30-something man who was sipping a grande iced coffee in Singapore. Why do you like Starbucks, I asked him. Why don't you go to a local cafe where the coffee costs a quarter as much? "It is cool," he responded; "I'm cool when I'm drinking it."
That sense of success – that sense of cool – is what is gone now.
It is gone because Starbucks violated the economic principles of cultural scarcity. Once something becomes too common, it can't keep generating cool or envy or status.
Now that there are Starbucks stores everywhere, in Tokyo and Terre Haute, London, and Lancaster (Pa. and Calif.), and Franklin, Tenn., and Franklin, Ind., it is too ordinary. Once the soundtrack promoted in stores changed from Miles Davis and Buena Vista Social Club to Kenny G. and Paul McCartney, it seemed too commonplace. When cappuccinos turned into Frappuccinos – a trademarked phrase by the way – the brand didn't seem as sophisticated. And now that Cosi and Panera – not to mention some airport lounges – look like Starbucks, it just doesn't look so special anymore either.
Even the company's much touted bluish values of doing good seemed to get scarcer, or at least spread thinner. Over the last year, Ethiopian officials accused Starbucks of something close to coffee colonialism; judges charged the company with unfair labor practices and putting its hand in tip jars; and environmentalists wondered loudly how green the firm could be when it used all of those throw-away paper and plastic cups.
Now Starbucks is just a coffee (and frothy milk and sugar) seller. In many ways, the company has no one to blame but itself. It wanted to grow and grow and force itself into the mainstream.
It succeeded. But that was the tipping point. At its height, consumers could no longer distinguish themselves from one another anymore. And the white cup with the green logo was emptied of cultural capital – long before gas prices pushed past $4 or even $3 a gallon.
For Starbucks to make a comeback, it will somehow have to capture that mojo again. And if it does, it won't matter how much a barrel of oil costs or what McDonald's is selling. Status seekers will come back only when Starbucks is a little scarcer and thus a little cooler.
• Bryant Simon, a professor of history and director of American studies at Temple University, is completing work on his latest book, "Everything but the Coffee: Learning About America From Starbucks."