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The founder of Second Cup (a coffee chain in Canada) told us what happened when a Starbucks opened across the street from a current Second Cup. "The lady was f

• mechanical_fish 19y ago
  Makes sense: When the line at Starbucks is long and yours is short, people come to you. When people want variety, they come to you. I don't go to the same restaurant in my neighborhood each time - I mix them up. People don't necessarily want the same coffee every day. Because there are coffee customers in the neighborhood that aren't already yours, you have an audience for your specials and sales that is relatively easy to reach. People won't go five blocks out of their way for a one-day, 20% off sale on bagels, but they might go five feet. Starbucks marketing is so much more effective than yours that they will attract customers that you never could. Once they're in the neighborhood, these customers are much more likely to come and taste your coffee - after all, if your coffee sucks, they can always spit it out and go back over to Starbucks. If your coffee doesn't suck, some of those customers will become regulars. Many people prefer local shops over chains... if the effort to switch is low, and if you make it easy to switch back. I remember reading that this is why specialty shops often tend to cluster in specific districts of a city. You would intuitively think that the best spot to open a new store is an underserved location far from existing shops . But, in fact, you're often better off opening a store one block away from your competitor, where there's some pre-existing traffic that is happy to do some comparison shopping. I once talked to a computer store operator who had deliberately set up shop across the parking lot from a new Micro Center, and he told me the same thing.
  • staunch 19y ago
    > When the line at Starbucks is long and yours is short, people come to you. That runs counter to the theory that "no one wants to eat an empty restaurant". Maybe it's different for coffee though?
  • jmzachary 19y ago
    To get my coffee fix, Starbucks is always the second choice. The only time I drink that sewage is if I'm stuck in an airport. In Baton Rouge, there is a local chain of coffee houses called CC's that serve much better brew. The mom-and-pop shops do pretty well, too.
• vlad 19y ago
  Close competition validates a business sector. "This intersection has four gas stations--let's stop at one now, like everybody else has." In fact, like the manager implies, it's more likely that Second Cup will be stealing business from Starbucks than vice versa! It's very simple. Almost every local and visitor who notices the two coffee shops will automatically think Second Cup must be much better if it's surviving against a franchise setup across the street! Their curiosity will get the better of them. The only way Second Cup can lose is if they have a pessimistic attitude with the customers, because word will spread. The local newspaper will write an article about the coffee business in three months time--it will either say Starbucks is a welcome addition; that they're hurting small businesses; or, in the best case, that both businesses are doing well. It's free publicity in any case. I think Second Cup will see an increase in out-of-town visitors. A lot of visitors will have already tried Starbucks coffee elsewhere, and when they're asking for recommendations, the locals will recommend 100 Coffee Street where Starbucks and Second Cup are, than Trevor's Coffee at 23 Vine Drive where there's only one option. But Second Cup won't only benefit from out of town visitors. The locals will respect Second Cup even more for being the little guy. (Remember, until paired up with the big guy, they were just another small business, like a Laundromat.) Next, anybody who wants coffee is now much more likely just to drive down that street, and make up their mind on which business to visit while driving there (customers know they don't have to make a decision until they get there, and if one is closed or busy, the other one will be open.) Third, businessmen have a safe bet on taking clients to a coffee shop, as well--whether the client wants a Starbucks they're familiar with or a local flavor. Finally, anybody who runs errands to pick up coffee for a group of employees can easily pickup coffee ordered from either place. The true business that would be hurt in this case would be a 3rd, lonely coffee shop in that town.