Coffee Wars
Goodbye, Starbucks: Not So Glad to See You Go
The argument over chains versus local businesses is not as simple as it seems.
By Jonathan Weber, 6-26-09
Author’s Note: This story first appeared on The Big Money, a business news website that’s part of the Slate group. I write a weekly small business column for The Big Money called “Making Payroll”.)
When a Starbucks opened across the street from our offices in downtown Missoula, Mont., a few years ago, a lot of people in this liberal college town were not too pleased. The national behemoth would squeeze the local coffee shops, critics said, and contribute to the homogenization of Missoula.
“In addition to supporting local cultural, social, and athletic events, local shops add a degree of color and flavor to areas that no Starbucks ever can—unless you like the contrived, calculated flavor that every other Starbucks in the country has,” wrote one commenter on NewWest.Net.
“Additionally, profits from local coffee shops tends to stay close to home, allowing for further local investment in the community. Starbucks profits get shipped off in giant suitcases to the company HQ three states away. Further, local shops are also more likely to hire local contractors, keeping even more money close to the source.”
As an independent local businessman whose largest competitor is a multibillion-dollar national chain, I’ve always been more than sympathetic to this argument. As a company, and as individuals, we’re all about supporting locally owned businesses and the eclectic downtown commercial culture that goes with them.
But last week, we learned the Starbucks would be closing—it couldn’t compete with the excellent alternatives. And I don’t see that as a good thing.
For starters, the idea that Starbucks would drive out independents was obviously incorrect. Break Espresso, barely 100 feet down the street, is busier than ever, thanks to a great physical space, good coffee, and free Wi-Fi. Starbucks has always said that its arrival actually increases business for all coffee purveyors in the area—and at the very least it didn’t hurt the neighbors here in Missoula.
Plus Starbucks’ prime space will probably stay empty for a while, given the economy. The employees will lose their jobs, which, while they don’t pay well, come with benefits. And that’s more than you could say about a lot of work in this low-wage town. More people looking for work and more empty storefronts on Higgins Avenue aren’t great for anyone in the community.
It’s usually smart business to support like-minded independent companies. Personally, I hardly ever set foot in the Starbucks, even though I think its coffee is just fine. I much prefer the Trailhead for sporting goods (rather than Sports Authority), Go Fetch for pet supplies (rather than Petsmart), Fact & Fiction for books (rather than Barnes & Noble), and First Security for banking (rather than Wells Fargo). Not coincidentally, these locals all advertise on NewWest.Net.
But the more personal nature of these relationships can also cut the other way. A local electronics chain that we wooed as a client for years recently pulled a small ad campaign because a satirical blog post on NewWest.Net offended the religious sensibilities of the owner. I doubt that Best Buy would have acted in that fashion.
Some national chains are starting to make an effort to source products locally, especially food. While it may be true at some level that profits are “exported” to headquarters, good branch managers are often active in their community and support the local businesses. In the case of franchises, they are, in fact, locally owned businesses.
I agree that a town dominated by chains is less interesting and rich than one with a vibrant independent business community. But here, at least, it seems the two can co-exist. And it’s dangerous to assume that what’s bad for the chains is good for the mom-and-pops. In this economy, a store closure is nothing to cheer about.
[End of article]Johnathan, I tend to agree. I used to avoid chains such as Starbucks like the plague, but I've personally seen the local coffee shop business in my little town thrive and actually 'step up it's game' a bit when 'Scrubrats' coffe arrived, even though they were 200 feet apart. This country's business history is full of stories about mega-chains that were reportedly going to grow so huge they would literally ruin every competitor around them, only to eventually sink back into obscurity and fade away. (Anyone old enough to remember when Sears so totally dominated retailing in the post WWII era?). The point is, there has always been room enough in America for another well run business, regardless of it's size. May it always be so.
Comment By Adam Liljeblad, 6-26-09Jonathan,
I see you used my Starbucks tirade from a few years back to frame this article. While I still do basically agree with most of what I wrote close to 2 1/2 years ago, I also agree with most of what you wrote here. A chain store will continued to be better than an empty store, and in a low-wage town like Missoula, someone willing to pay competitively and offer full benefits shouldn't necessarily be shunned. It really does take a full gamut of successful people, businesses and organizations to make a place diverse and interesting. Local stores and chain stores definitely can co-exist, and they both add value to a place. As long as that co-existence continues, I'll be content. Probably.
Jonathon, it sounds like you are having it both ways. Store closings are never good for employees, but it really sounds like there just wasn't enough business for two coffee stands 100 feet apart. What would your article have looked like if the local guy hadn't stepped up their game, and instead had folded?
More importantly, what are the long term effects over three years of having a Starbucks but losing the local guy, or vice versa? When the result is multiplied by 20 local merchants failing over three years vs twenty (or less) chain stores surviving, and they are pumping the money out of the community every night via electronic transfer, which causes a much weaker local economy, eventually it ends up with less advertising, and you yourself face extinction. This would be a tragedy, but you would be the merchant of the month, failing all by yourself feeling the world doesn't care.
However, we do care. We are mutually dependent on each other economically, whether we want to be or not, which is why all other peripheral arguments are less essential. And if we mutually dependent, then keeping dollars within the local community isn't just something you do for others, it is actually something you also do for yourself.
'Break Espresso' is bucking the national trend. This sounds like a cause for celebration, not a time to mourn the loss of a chain. If you ask those folks at Break Espresso, who saw their revenue drop, who had to think about letting key employees go, who couldn't expand to robust profitability, and were struggling much more than they will be now, you might just hear them Cheer!
...just like you would, if all local businesses suddenly made a concerted effort to advertise with you, instead of your 'multibillion-dollar national chain' competitor...
My big beef with the mega-chains, beyond the homogeneity they smear across the nation, is that they rarely contribute to local non-profits. Independent local businesses are hit up many times a day by good causes, asked to donate money, free goods and services, buy ads, and on and on -- sometimes the non-profit staff or volunteers making the pitch then turn around and shop at the big boxes to save a few bucks. Somehow, people aren't making the connection between their good causes and power of their purchasing habits.
Comment By KEMcLean, 7-04-09Hi. I'm in grad school at Roosevelt University in Chicago. We're doing a group project on Starbucks and are hoping people can help us out by filling out a survey.
http://www.surveymonkey.com/s.aspx?sm=pqPr2jiewtNm3Xb63PgkWw_3d_3d
Thanks for the consideration!