Saving Starbucks

Brand Autopsy has an incredible series on what it is going to take to save Starbucks. While Starbucks is far from heading into the deadpool, its same store traffic has dropped for the first time in history. While the folks over at Brand Autopsy have some wonderful ideas, and I can see where Seni Thomas is going with his new media ideas, but I say it is even simpler than all of that. In fact, it is simpler than what Starbucks is doing with traditional advertising. Are you ready for this? They should make their wi-fi free. That is all.

You see, when their store traffic was high, they didn't need, or even want, people hanging out, leeching off the free Internet, even if they might buy an extra cup of coffee. The customer turnover was the key to the model; pushing people through like cattle. They simply had plenty of foot traffic and many of their stores were packed. Those that really just wanted a place to hang out, drink coffee, and work on the web found the local coffee shops, and some national chains, more than accommodating. And, frankly, for people still going to Starbucks for business meetings, many find a signal from an adjacent apartment complex or other business or use a mobile data card and connect that way. Starbucks lost a large share of people, not because the people found a better coffee product, but because the thing that was once a luxury, a free Internet connection, was now at the core of their decision on where to go for coffee.

So, the net effect of providing free wi-fi is that you instantly get back the folks that would prefer Starbucks but choose the local coffee shop that has the free wi-fi. This, by the way, will also cause the local coffee shops to have to step up to compete on different level, rather than just offering something Starbucks doesn’t. Additionally, by providing a web-interface to gain access to the free wi-fi system that displays terms of service and disclaimers, Starbucks can also advertise to a captive audience (similar to Panera).

While I wouldn't suggest selling ads to third-parties (or worse using contextual advertising from Google) on the login-portal outright, as that might dilute the brand, they could certainly drive users to partner online services, such as their iTunes tie-in. As an additional value-add, and revenue driver, Starbucks could present coupons that the customer can send to their mobile device and show the cashier for discounts on non-standard items, such as takeaways like mugs, packaged coffee, etc. No need to discount drinks, they'll already buy those at full price, but this would drive revenues through ancillary items and push slow movers in a big way. Additionally, I would provide a pay service that offers a better QoS guarantee for people that still want that, but they would still get the advertising and coupons because it is a value-add, not just a nuisance.

So, in my estimation, that 1% traffic drop could be made up, and revenues increased, by opening up their wi-fi and marketing their retail products through that channel. No need to spend any money advertising through traditional channels, no need to develop new innovative drinks, no need to glue cups to cars, etc. I don’t think this is the end-all, be-all of what they need to do, but it is certainly a start. I do like the Brand Autopsy suggestion of making the stores smell more like coffee, however.

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Wal*Mart Shopper Segmentation Plan Update

Apparently someone leaked the internal slides detailing how Wal*Mart developed their "Shopper Segmentation Plan". It is an interesting read and makes perfect sense. If you look at the comments section of the Consumerist there seems to be a lot of negative reaction to these slides. I think it is more of the "whatever Wal*Mart does is bad" reaction than a true reaction to the study.

The slides are here, and remember this was "leaked" so it may not be real.

- Lincoln

Wal*Mart Changes Things Up, Again

On Friday, March 4, 2007 the New York Times published an article detailing Wal*Mart's new way of looking at customers' buying styles. The fact that a search of the blogosphere has only produced only a couple of results (TracyPlaces, Ponder Marketing) is troubling; perhaps we'll see more on Monday. As we should all know by now, the Wal*Mart Effect affects us no matter where we shop, even if we boycott Wal*Mart.

To all of the manufacturers and wholesalers out there that sell to retail merchandisers, this should have a huge impact on how you look at your future sales; even if you do not sell to Wal*Mart. If you don't sell to Wal*Mart, but have a high-end brand, perhaps this news would make you consider Wal*Mart as a merchandiser who could carry your product and not tarnish your brand.

In fact, if what Wal*Mart says is true, there are people with lots of money shopping there, and if your product is there too, they might pick it up. Even if it is for no other reason than to save a buck, but still appear in front of their friends with name-brand items. This could really change a lot of things in the retail merchandising business. Don't be surprised when those three categories ("brand aspirationals", "price-sensitive affluents", "value-price shoppers") begin to circulate as the defacto standard in the discount retail segment (Target, K-mart, etc.).

Of course, my standard warning to any manufacturer or wholesaler considering selling to Wal-Mart applies here. Just because you can, doesn't mean you should. Are you adequately prepared operationally to deal with their supply chain efficiency requirements? Can you handle the pressures of working with their strict pricing models? Do you have the support infrastructure to handle the rapid increase in sales volume? Often companies see a contract for Wal-Mart as a blessing, but that is not always the way it plays out. Sometimes it is best to say "no" to Wal-Mart and lose a large volume of sales than to say "yes" and lose your entire business.

- Lincoln