Imagine for a moment that you were a product manager working at Starbucks. The company is growing, everyone likes your product, you would be on top of the world. In fact, Starbucks has opened over 2,000 cafes in the U.S. over the past three years. The result of this rapid growth has been that you can find a Starbucks just about anywhere. However, the downside to all of this growth is that their traffic growth is starting to slow. What is a Starbucks product manager to do?
The Problem With Too Many Stores
So what’s going on here? In the past, Starbucks has been telling the world about its quarterly same store sales growth. In the U.S. this has been running at about 5% or more. However, back in 2016 Starbucks started to miss what the analysts thought that they should be making. Last year, Starbucks reduced their long-term sales and profit targets. Later on, Starbucks reported that this year the traffic to their U.S. stores was going to be flat for the fiscal second quarter. Clearly, the Starbucks product managers are going to have to make some changes to their product development definition.
From a product manager point-of-view, what is going on here is starting to become pretty clear. The U.S. coffee market is starting to become over-stored. What this means for the Starbucks product managers is that coffee drinker traffic is starting to become hard to come by. The problem that Starbucks is facing is that if they continue to open stores at the rate that they are doing so right now, the impact of cannibalization of their existing stores will only intensify. The reason that there are so many Starbucks stores is because the CEO of Starbucks, Howard Schultz, was always a strong advocate of aggressive growth. The result of his efforts is that there are now over 14,300 Starbucks locations in the U.S. – more than the number of McDonald’s restaurants. Now that Howard has left the company, there is an opportunity to make some changes.
One of the biggest issues that the Starbucks product managers have had to deal with is simply that opening so many new stores has been a big distraction for them. At the same time there have been a number of other issues that the product managers have had to be dealing with that will all probably be showing up on their product manager resume. One of the biggest has been Starbucks agreement to sell the rights to distribute Starbucks packaged coffee to Nestle SA. At the same time they have been trying to integrate a joint-venture in China.
Starbucks Plans To Restart Growth
In order to restart growth at Starbucks, the product managers are first going to have to make sure that they understand just exactly what is going on. As a first step, in the U.S. Starbucks is already trying to determine just exactly how they are going to go about reviving afternoon sales at their stores. The people who study coffee stores have reported that Starbucks slowing growth at their U.S. stores began when they accelerated their new-store openings back in 2014. The good news is that the return on investment in the brand’s new stores was high, but it has been declining.
The fact that the Starbucks CEO stepped down is hoped that it will start to provide the Starbucks product managers with more options when it comes to pulling back from opening so many stores so quickly. However, right now Starbucks is standing firm. They have said that they will be opening 2,300 new stores globally and right now they are not changing that number.
The Starbucks product managers believe that they understand what is going on. It is their belief that every time that they open a new store, it will tend to offset sales declines in nearby existing stores. They understand this effect. The Starbucks product managers still take the time to look at their results store-by-store. They understand that in order to be successful, they are going to have to learn from each new store that the brand opens. The result of all of this learning will be that they will make adjustments and with a little luck they will be able to get Starbucks back on track to revenue growth.
What All Of This Means For You
There is no doubt that the Starbucks brand of coffee shops would be a fantastic place to work as a product manager. They are very popular and people seem to really like their product. In order to keep up with customer demand, Starbucks has been opening new stores at a furious pace. However, now sales are starting to stall. Somebody is going to have to go back and take a careful look at their product manager job description. What should the Starbucks product managers do?
In the past, Starbucks same store sales had been increasing by 5%. However, over time that started to decrease. In fact, Starbucks has just announced that traffic at their stores this time around is probably going to be flat. The problem that Starbucks is running into is that they have just built too many stores. Now when they open a new store, they run the risk of cannibalization of the traffic at one of their other stores. The push to open so many new stores came from their CEO Howard Schultz who has now stepped down as CEO. Starbucks product managers have not really been able to deal with this problem because they have been distracted by other things that have been going on at the same time. Starbucks product managers also have to solve the problem of declining afternoon product sales. The problem with declining store sales has been around since 2014. Despite these problems, Starbucks still plans on opening 2,300 stores this year. The Starbucks product managers believe that they understand what is going on, now they just need to find a way to boost revenues.
The Starbucks product managers need to find ways to get you and me to come to their stores more often and spend more money when we do come. In order to make this happen, they are going to have to carefully identify what products we are willing to purchase and why. The availability of so many Starbucks stores means that perhaps the product managers are going to have to come up with ways to make each one of them be unique so that people will go to their favorite store over and over again.
Question For You: Do you think that Starbucks should plan on opening so many stores this year or should they cut back?
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What We’ll Be Talking About Next Time
As product managers, we all spend our time trying to better understand what our customers really want. This can be a tricky thing to do. We need to understand what motivates our customers in order to better understand how we can provide them with the products that they will be willing to buy. Product managers at some of the largest companies out there, Amazon, Walmart, and Target, have decided that being able to deliver products that customers have ordered the next day is the best way to attract more customers. Just exactly how are they going to go about doing this?