4 ms·

Back when Starbucks first exploded to such ludicrous levels that you'd sometimes find two of them sharing a single parking lot, the expectation became that ther

Back when Starbucks first exploded to such ludicrous levels that you'd sometimes find two of them sharing a single parking lot, the expectation became that there would always be a Starbucks nearby. So much so that when I tried to drive from Phoenix to Los Angeles early one morning, I was surprised, then baffled, then amazed, then outraged that there was no Starbucks at all on I-10. I spent nearly 4 hours driving with no mocha in me at all, and was likely a hazard to other drivers. I wouldn't be surprised to find that somebody had driven off the road on that stretch and sued Starbucks for negligence in not providing the requisite number of restaurants per square meter that its customer base had come to expect. Fortunately, they've now put one in Blythe, so the drive is much less perilous.

twoodfin 15y ago
Starbucks' expansion was interestingly "clumpy". Not surprising, I guess, when you realize they have to deal with the same supply chain issues as anyone else in a similar space. They didn't open a freestanding store in Tulsa until 2002, years after seemingly every other corner in Manhattan had one.
- patio11 15y ago
  Starbucks also has a very sophisticated siting operation which predicts demand similar to how an oil company predicts oil. For green fields, you measure proxies, look at formula based on historical data, and guess. If you sink one well and hit a gusher, though, your expectation of profitable exploitability in the vicinity goes WAY up, so you start going nuts. You'd think that two Starbucks across the street would cannibalize each other, but you'd be betting against very smart people who have made this their lifes' work and been richly rewarded for succeeding at it. Source: anecdata from my father, who works in commercial real estate and thinks they (and Walgreens) are the two savviest businesses he's ever worked with in his industry. P.S. A software solution to turn any arbitrary firm into Starbucks would be worth tens of millions of dollars if you sold it correctly. Billions if you went the next step and started flipping properties based on the software. (e.g. "101 Main St. on foreclosure auction for 200k, predicted value to a banking customer is 1.2 million, expected cost to work deal is 200k. Placing bid now.")
  - Kaizyn 15y ago
    As I understand their placement of stores, the "cannibalization of customers" is how they determine if they have sufficiently saturated a metropolitan area. Basically, they keep building stores in a city until adding one more doesn't increase their overall business. The basic idea is that if they haven't saturated an area, then there's room for competitors to put in stores. I wish I could remember which publication I read this in.
  - itmag 15y ago
    P.S. A software solution to turn any arbitrary firm into Starbucks would be worth tens of millions of dollars if you sold it correctly. Whoa, that is seriously interesting. Would you mind emailing me more details about your idea? :)
  - itmag 15y ago
    You'd think that two Starbucks across the street would cannibalize each other Speaking of that, would they operate as two competing entities? Or would they help each other out? Ie lend each other supplies, direct overflow customers across the street, refrain from price wars, things like that.
    - twoodfin 15y ago
      Freestanding Starbucks stores aren't franchises, so they have every incentive to coordinate for maximum benefit. I'd be surprised if SBUX management had set up any incentives for it to work any other way.
      - itmag 15y ago
        Interesting. Even if they were franchises, there might still be some game-theory advantage to cooperating. After all, a happy customer at one Starbucks is going to be positive toward all Starbuckses.
  - tptacek 15y ago
    For whatever it's worth: Jim Collins coverage of Walgreens in _Good to Great_ focuses on how Walgreens pioneered this siting concept.
- DanBC 15y ago
  Starbucks knew that local competition helped them.

twoodfin 15y ago

Starbucks' expansion was interestingly "clumpy". Not surprising, I guess, when you realize they have to deal with the same supply chain issues as anyone else in a similar space. They didn't open a freestanding store in Tulsa until 2002, years after seemingly every other corner in Manhattan had one.

patio11 15y ago
Starbucks also has a very sophisticated siting operation which predicts demand similar to how an oil company predicts oil. For green fields, you measure proxies, look at formula based on historical data, and guess. If you sink one well and hit a gusher, though, your expectation of profitable exploitability in the vicinity goes WAY up, so you start going nuts. You'd think that two Starbucks across the street would cannibalize each other, but you'd be betting against very smart people who have made this their lifes' work and been richly rewarded for succeeding at it. Source: anecdata from my father, who works in commercial real estate and thinks they (and Walgreens) are the two savviest businesses he's ever worked with in his industry. P.S. A software solution to turn any arbitrary firm into Starbucks would be worth tens of millions of dollars if you sold it correctly. Billions if you went the next step and started flipping properties based on the software. (e.g. "101 Main St. on foreclosure auction for 200k, predicted value to a banking customer is 1.2 million, expected cost to work deal is 200k. Placing bid now.")
- Kaizyn 15y ago
  As I understand their placement of stores, the "cannibalization of customers" is how they determine if they have sufficiently saturated a metropolitan area. Basically, they keep building stores in a city until adding one more doesn't increase their overall business. The basic idea is that if they haven't saturated an area, then there's room for competitors to put in stores. I wish I could remember which publication I read this in.
- itmag 15y ago
  P.S. A software solution to turn any arbitrary firm into Starbucks would be worth tens of millions of dollars if you sold it correctly. Whoa, that is seriously interesting. Would you mind emailing me more details about your idea? :)
- itmag 15y ago
  You'd think that two Starbucks across the street would cannibalize each other Speaking of that, would they operate as two competing entities? Or would they help each other out? Ie lend each other supplies, direct overflow customers across the street, refrain from price wars, things like that.
  - twoodfin 15y ago
    Freestanding Starbucks stores aren't franchises, so they have every incentive to coordinate for maximum benefit. I'd be surprised if SBUX management had set up any incentives for it to work any other way.
    - itmag 15y ago
      Interesting. Even if they were franchises, there might still be some game-theory advantage to cooperating. After all, a happy customer at one Starbucks is going to be positive toward all Starbuckses.
- tptacek 15y ago
  For whatever it's worth: Jim Collins coverage of Walgreens in _Good to Great_ focuses on how Walgreens pioneered this siting concept.
DanBC 15y ago
Starbucks knew that local competition helped them.