Starbucks on the slide

Here is a really interesting story for business economics students to follow in the weeks and months going forward. Starbucks has announced that it plans to close one store in 20 across its US branch network - meaning the loss of around 600 stores.

Most of them were opened after 2006 during a phase of aggressive expansion The reason? Officially “The locations set to close include ones that “were not profitable and not projected to provide acceptable returns in the foreseeable future”

So a great example of the ‘shut down point’ - cutting back where the returns simply do not justify the investment. Sales in the 1st quarter of 2008 were reported as being down 28%.

Is this the beginning of the end for Starbucks? Lots of comment here on the lively Guardian blog.
Is Starbucks a has been?

I rarely step foot in Starbucks now preferring instead coffee bars that at least attempt to serve you a decent coffee not dripping with luke warm milk. Their prices are simply too high for our changing economic climate. A cup of their Fair Trade coffee without any of the bells and whistles is just about value for money - as is their short cappucinno! But there are plenty of other coffee stalls around providing a better deal. If only Starbucks provided free wifi in their stores, I might be persuaded to stay awhile there. Despite recent developments, the price of a gallon of crude oil is still way cheaper than a gallon of Starbuck’s so-called coffee.

More reading and comment on Starbucks is here:

Starbucks Goes From Venti to Grande (Time Magazine)

(FT) Starbucks goes skinny as froth withers

BBC news audio-visual