Starbucks, the specialty coffee retailer, is one of the great 21st century American success stories. Considered as one of the most successful and admired companies today, Starbucks has grown from a single store in Seattle 33 years ago to 9,405 company-operated stores and 8,661 licensed stores in 61 countries. In fiscal 2012, the company posted revenues of $13.3 billion.
Cup by cup, Starbucks has changed the way people from different continents drink coffee. More remarkably, the company successfully transformed a pedestrian commodity into a high-end accessory. It has created a “Starbucks lifestyle” that more people continue to embrace in the United States and abroad.
From tasty beverages to proprietary whole bean coffee blends to strategic relationships, small businesses have so much to learn from Starbucks. You may not have the resources that Starbucks has in its arsenal, but there are a number of things you can emulate from this company and apply to your own business, albeit on a significantly smaller scale.
More than the taste of its coffee, there are a number of factors that propelled Starbucks’ latte to the forefront. Below are some of the things that you can learn from Starbucks — a company that started small, dreamed big and grew to be a gigantic global corporation:
1. Start with a good business concept.
Starbucks is a tremendous success because it capitalized on a concept that hadn’t existed before — the coffeehouse as a gathering place. It is not just a place to get a cup of gourmet coffee, but it has become a center for socializing and intellectual discussion, particularly among students and young urban professionals. Starbucks created a unique offering that was relevant and differentiated. It turned an ordinary and humble product into an extraordinary experience that customers are willing to embrace.
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2. Think big.
Starbucks opened its first store in Seattle’s Pike Place Market in 1971. The company started small, but even early on it always had big ambitions. The company was made public in 1982, almost a decade after it started. From its humble beginnings, the company currently holds about 40 percent of the specialty coffee market, and the anticipated growth in this category will offer the company considerable opportunities for further growth and expansion in the future. In fact, it can be said that Starbucks is just at its early stages to colonize the globe.
Starbucks used the slow-but-sure approach to business growth. It was certainly not an overnight success. But through perseverance, patience, management and financial smarts, the company became a formidable global presence. If Starbucks did it, then surely other small businesses can replicate its success (who knows, it may be yours).
3. Think outside the box.
Starbucks’ strength lies in its ability to spot opportunities, even if that means debunking accepted retail trends. Starbucks’ ability to think outside the box is a common trait that propelled other small businesses to the big league.
Starbucks has well demonstrated this behavior in their approach to real estate, which in itself is legendary. Contrary to established tenets of retailing, the company does not choose a location based solely on demographics, traffic patterns, the location of competitors, and even spacing of its own stores. Instead, it clusters its stores in chosen areas, making Starbucks ubiquitous in many city streets. Traditional retailing mindset warns against locating stores nearby as it can cut sales at existing outlets.
Starbucks went against the accepted norm and pursued clustering, using this strategy to increase total revenue and market share. The risk paid off — its practice of blanketing an area with stores helped achieve market dominance quickly. The strategy also made it cheaper to deliver supplies and manage each store. The size of the company has enabled it to absorb any losses that would result from the cannibalizing of store sales when a new one opens up nearby.
4. Partner smart.
Starbucks has demonstrated that even a large company needs help to achieve its goals. In fact, a key reason for Starbucks’ success is its strategic partnership initiatives. In 1993, the company partnered with Barnes and Noble bookstore in the United States to make its coffee available to bookstore customers. Continuing its strategy to gain a foothold in the bookstore segment, Starbucks formed an alliance with Canadian bookstore Chapters Inc. in 1995.
Starbucks entered into a partnership with Pepsi-Cola Company in 1996 to start the business venture called North American Coffee Partnership, which then sold a bottled version of Starbucks Frappuccino blended beverage. During that same year, the company also partnered with Dreyer’s Grand Ice Cream, Inc. and introduced Starbucks’ Ice Cream and Starbucks Ice Cream bars, which quickly became the best selling coffee ice cream in the United States. In 2001, the company entered into a partnership with Hyatt Hotels Corp.
To demonstrate and pursue its social commitment objectives, Starbucks has also partnered with a number of organization such as Conservation International, the international relief and development organization CARE, Earvin “Magic” Johnson’s Johnson Development Co., JumpStart, among others.
Starbucks was able to achieve its objectives, break new markets, and increase its bottomline by entering into strategic alliances with the right companies. For your small business to succeed, you need to realize that you alone cannot fill the gap in serving the needs of your target market. You will need the help of another entrepreneur or another company who is willing to work with you and share financial risks. It may not be Hyatt Hotel or Pepsi, but your partner may help you enter new markets, and get products and services to market faster. Strategic partnerships will be your way to enhance your competitiveness in the marketplace and keep pace with the rapid changes of technological innovation, just like Starbucks.
Continue: Learning from Starbucks (Part 2)