Wednesday, July 2, 2008

Your Starbucks is Safe

Posted By on Wed, Jul 2, 2008 at 2:35 PM

By OWEN MORRIS

starbucks_at_ward_parkway_thumb.jpg

Starbucks announced today that it plans to close 600 stores in the U.S. Starbucks is keeping mum on which stores it will close but said "70 percent of the stores to be closed were opened after the start of 2006."

What is the likelihood that your neighborhood Starbucks will go the way of the Westport Starbucks? Not very likely.

First the math. According to Pete Bocian, Starbucks’ CFO, the chain has opened up roughly 2100 stores in the United States since 2006. Starbucks is closing 420 of those 2100 stores, or one in every five. Fifteen Starbucks have opened up in the KC area since 2006, meaning that if Starbucks were to just close the 600 stores randomly, it would only close three KC ones.

But Starbucks is not closing stores randomly. It’s closing them in major U.S. markets, a comment Bocian made in a conference call to investors today and a phrase that Starbuck’s PR agency Edelman emphasized in an e-mail to The Pitch. With only around 25 stores, Kansas City is not a major market for Starbucks. Compare that to Portland, a similar sized city with more than 125 Starbucks.

The main criteria Starbucks is considering is a store’s proximity to other stores. Some stores are so close that they’re cannibalizing each other, Bocian said. That’s not a problem in Kansas City, where the Starbucks density is low. The only two KC Starbucks that could be affected by such cannibalization are the two downtown – one’s as 12th and Main, the other at 13th and Main. If one of those two goes, it’ll almost surely be the one in the H&R Block Headquarters which is newer and has the worse location.

The decision affects only Starbucks stores, meaning that Starbucks stands like the ones in Hen House or at KCI will all remain open.

It’s a safe bet that your Starbuck store will stay open too.

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