‘I can make my own,’ say Starbucks customers turning their back on chain – as ex-CEO calls for 3 changes to address rut | 3V98ZFG | 2024-05-12 17:08:01
'I can make my own,' say Starbucks customers turning their back on chain – as ex-CEO calls for 3 changes to address rut | 3V98ZFG | 2024-05-12 17:08:01
STARBUCKS customers have revealed how the cafe chain's star has lost its shine in the face of falling profits and more competition from rivals.
Now Howard Schultz, who served as Starbucks CEO for 24 years in three different spells, has broken his silence on the coffee giant's money woes.
Posting on LinkedIn this week, Schultz wrote that Starbucks' stores, which have been hit by labor disputes, accusations of illegal union-busting, and declining sales globally, need to establish a "maniacal focus on the customer experience, through the eyes of a merchant."
The answer to their problems, he says, "does not lie in data, but in the stores."
Starbucks, which has over 17,000 stores in the U.S., recently experienced its first drop in quarterly revenue since 2020, with sales in North America declining by 3% in this year's second quarter, according to the chain's financial reports.
The reason behind the revenue drop, according to Starbucks' leadership, is the rise of the "cautious customer."
As inflation is running rampant in the country, consumers are forced to be more aware of where they spend their hard-earned cash.
While corporate profits now account for the highest share of national income in more than 10 years, according to the National Bureau of Economic Analysis, consumers are feeling the strain more than ever in their lifetimes.
A majority of Americans are worse off financially now than compared to before the start of the pandemic, according to Yahoo! Finance.
"Money changed," Jacqueline Phillips, a New Yorker and daily coffee drinker, told the U.S. Sun as she explained why she stopped frequenting the chain.
"The price of everything going up leaves little extra for the spoils," Phillips said. "Starbucks has become more of a treat than an everyday necessity. I can make my own latte now at 7-11 for $2 as opposed to $6 at Starbucks. Does it taste as good? Eh, but it's good enough and I can afford it."
Phillips also details how changes to how the chain gives customers rewards, now having to earn twice as many points to earn a free cup of hot coffee, turned her off from the brand.
<!-- End of Brightcove Player --> But it isn't just points and finances that are pushing customers away from the coffee giant.
For customers like Morgan Bissett-Tessier, a 31-year-old law school student and part-time school administrator in New York, reports about mistreatment of Starbucks employees, union-busting, and not being allowed to wear Black Lives Matter attire, despite that policy being reversed, ruined the brand for her.
"Starbucks was never a regular thing for me because it was expensive, so it was a treat," Bissett-Tessier told CBS Money Watch. "Now it doesn't feel worth it."
Last year, the National Labor Relations Board found that Starbucks violated federal labor law over 270 times since the campaign to unionize started in Buffalo, New York two years ago.
This makes Starbucks "one of the worst violators of labor law in modern U.S. history," said Clara Wheatley-Schaller, the political director for Workers United, the union representing Starbucks workers.
But despite these roadblocks causing customers to look elsewhere, Schultz believes Starbucks will recover from their recent downturn.
"Of that, I am certain," he added.
"Senior leaders — including board members — need to spend more time with those who wear the green apron," he went on.
Schultz also advises the chain to "reinvent the mobile ordering and payment platform," to "make it the uplifting experience it was designed to be."
He also says the chain's go-to-market strategy needs to be overhauled and elevated with "coffee-forward innovation that inspires partners and creates differentiation in the marketplace," saying the brand needs to "focus on being experiential, not transactional."
"We always appreciate Howard's perspective. The challenges and opportunities he highlights are the ones we are focused on," a Starbucks spokesperson said in response to Schultz's remarks.
"And like Howard, we are confident in Starbucks' long-term success," they concluded.
But is that enough to win customers back?
Diane Cantave, an activist with Long Island Jobs for Justice who helped unionize seven Starbucks locations on Long Island, including two in Hempstead – the most populated town in the country, isn't so sure.
She believes that if Starbucks were to treat their workers fairly and stop creating a name for themselves that is synonymous with illegal labor practices, maybe more customers would be willing to support their business.
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