3 ms·

You’re disregarding brand appeal. Starbucks has no real competitive advantage over Local Coffee Co. other than great location, decor and brand appeal too. That

You’re disregarding brand appeal. Starbucks has no real competitive advantage over Local Coffee Co. other than great location, decor and brand appeal too. Thats what OP argues were the deciding factors for them. To attribute nice decor as being nothing more than a sunk cost is erroneous at best.

CPLX 7y ago
That's not correct. Starbucks has incredible economies of scale and purchasing power at this point. Clearly Wework has at least some economies of scale, but as for purchasing power not so much. The mass importation, distribution, and sale of a perishable agricultural product is a whole different kind of thing.
- glaive123 7y ago
  Starbucks also has incredible gross margins of close to 60%. Almost as high as a SaaS business (70-95%). WeWork has 10-15% gross margins. "Gross margin is a company's net sales revenue minus its cost of goods sold (COGS). The gross margin represents the amount of sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells."
  - dyarosla 7y ago
    Starbucks does not have more competitive gross margins than Local Coffee Co. would to be a big enough differentiator.
- dyarosla 7y ago
  Let’s go with your argument. What economies of scale and purchasing power would make for a differentiable competitive difference vs Local Coffee Co? Are those economies the driving force for Starbucks success? For their competitive advantage in the eyes of a consumer? WeWork is an international brand. Can you name another coworking space in nearby [state/country]? On the other hand there’s prob a WeWork there with a certain consistency wrt quality that you’d expect.
  - CPLX 7y ago
    I can, Regus. They’ve been around forever, this business model is not novel. But the lack of examples doesn’t support the argument the way you think it does. That means it’s very much an open question if this model could ever be successful. Unlike chain food/beverage which is a highly proven business model.
    - dyarosla 7y ago
      But you still haven’t given me an example. Thusly any competitor to come into this space would have to spend as much as WeWork at least to unseat them or to make a competitive brand for themselves. Sure the market’s not new, but the solidified brand in this market is. That counts for a lot.
      - CPLX 7y ago
        I have indeed given you an example, it’s called Regus. Google it, they have an international brand too. Wework now has a higher profile. Good for them, but what’s that worth exactly? Having brand recognition is not at all the same thing as a barrier to entry of a market, or a network effect. The market for shared or managed office has very low barriers to entry and modest network effects. Thus making the concept of a monopoly in this market more than implausible.
  - csande17 7y ago
    > What economies of scale and purchasing power would make for a differentiable competitive difference vs Local Coffee Co? If Starbucks spends less money buying coffee, that means they can afford to spend more money on nice decorations (and better real estate, more ads/PR to increase brand presence, etc.) than Local Coffee Co. The real estate/furniture is presumably a relatively small portion of the operating costs of a coffee shop, so e.g. buying 10% cheaper coffee beans could mean getting a location that's two times as attractive to customers. WeWork might not be able to do that as easily because for them, the real estate and furniture is their only product.
    - 7y ago
southerndrift 7y ago
Additionally to CPLX's point, they can also move profits into low-tax countries by licensing their brand. The fix costs for that are too high for a Local Coffee Co. to copy.
briandear 7y ago
Starbucks also has product consistency. I know a Flat White in Kansas City will be the same as a flat white in Vancouver. If you like that product, that consistency is welcome.
- dyarosla 7y ago
  So that would be a similar case for WeWork where you’d expect a bar for quality of offering
marmaduke 7y ago
Starbucks has good coffee, at least in France it's the only good drip coffee I've found

CPLX 7y ago

That's not correct. Starbucks has incredible economies of scale and purchasing power at this point. Clearly Wework has at least some economies of scale, but as for purchasing power not so much. The mass importation, distribution, and sale of a perishable agricultural product is a whole different kind of thing.

glaive123 7y ago
Starbucks also has incredible gross margins of close to 60%. Almost as high as a SaaS business (70-95%). WeWork has 10-15% gross margins. "Gross margin is a company's net sales revenue minus its cost of goods sold (COGS). The gross margin represents the amount of sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells."
- dyarosla 7y ago
  Starbucks does not have more competitive gross margins than Local Coffee Co. would to be a big enough differentiator.
dyarosla 7y ago
Let’s go with your argument. What economies of scale and purchasing power would make for a differentiable competitive difference vs Local Coffee Co? Are those economies the driving force for Starbucks success? For their competitive advantage in the eyes of a consumer? WeWork is an international brand. Can you name another coworking space in nearby [state/country]? On the other hand there’s prob a WeWork there with a certain consistency wrt quality that you’d expect.
- CPLX 7y ago
  I can, Regus. They’ve been around forever, this business model is not novel. But the lack of examples doesn’t support the argument the way you think it does. That means it’s very much an open question if this model could ever be successful. Unlike chain food/beverage which is a highly proven business model.
  - dyarosla 7y ago
    But you still haven’t given me an example. Thusly any competitor to come into this space would have to spend as much as WeWork at least to unseat them or to make a competitive brand for themselves. Sure the market’s not new, but the solidified brand in this market is. That counts for a lot.
    - CPLX 7y ago
      I have indeed given you an example, it’s called Regus. Google it, they have an international brand too. Wework now has a higher profile. Good for them, but what’s that worth exactly? Having brand recognition is not at all the same thing as a barrier to entry of a market, or a network effect. The market for shared or managed office has very low barriers to entry and modest network effects. Thus making the concept of a monopoly in this market more than implausible.
- csande17 7y ago
  > What economies of scale and purchasing power would make for a differentiable competitive difference vs Local Coffee Co? If Starbucks spends less money buying coffee, that means they can afford to spend more money on nice decorations (and better real estate, more ads/PR to increase brand presence, etc.) than Local Coffee Co. The real estate/furniture is presumably a relatively small portion of the operating costs of a coffee shop, so e.g. buying 10% cheaper coffee beans could mean getting a location that's two times as attractive to customers. WeWork might not be able to do that as easily because for them, the real estate and furniture is their only product.
  - 7y ago

southerndrift 7y ago

Additionally to CPLX's point, they can also move profits into low-tax countries by licensing their brand. The fix costs for that are too high for a Local Coffee Co. to copy.

briandear 7y ago

Starbucks also has product consistency. I know a Flat White in Kansas City will be the same as a flat white in Vancouver. If you like that product, that consistency is welcome.

dyarosla 7y ago
So that would be a similar case for WeWork where you’d expect a bar for quality of offering

marmaduke 7y ago

Starbucks has good coffee, at least in France it's the only good drip coffee I've found