Starbucks & Saks

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by: Jonathan Salem Baskin

As the economic meltdown continues to challenge our very premises about brands and selling, I’m intrigued to watch two well-known names respond to our dire circumstances in somewhat similar ways.

Starbucks is launching instant coffee: called "Via," it promises to recreate the company’s drinking experience at home or on the go, and for just a bit less than a hot small ("Tall") cup of its joe would cost in one of its outlets. Company execs say that the market is gigantic — 81% of coffee sales are instant — and company founder/chief reviver Howard Schultz says "this is a transformational event in the history of the company."

I just wonder if anybody wants to drink it.

Starbucks has always been more about the in-store experience than the actual coffee it served. Of course, the stuff had to be really good, but the brilliance of the concept was that the stores were a stop-over for drivers at which they got to encounter the smells, sights, and context of a coffee shop. The "third place" concept, while as old as the coffee houses of the Enlightenment, was new for harried commuters and unemployed consultants alike. 

While confronted with serious price pressure for its high-margin kooky concoctions, Starbucks’ real problem has been that its store experiences have become crowded and stinky. Too many people ordering too many customized drinks meant long waits, and it’s just so plain irritating to listen to them order and kvetch. Adding cooked sandwiches to the menu meant odors of tuna and burnt bread wafted across you as you waited in line. 

Does an instant coffee packet get consumers to engage with the Starbucks brand in some meaningful way? It sure saves them a visit to the stores, especially if the drinks are as tasty as promised. Transformational? Perhaps. But I would have expected lots of innovative, meaningful changes to the store experiences; other than a quickie 3-hour shut-down a while back to make sure employees had read their job description manuals, there’s been not a word from Starbucks on changing the real drivers of its brand differentiation.

Saks Fifth Avenue seems to have a similar approach to avoiding those drivers of brand preference, in that its latest plans center on 1) reducing prices by selling cheaper stuff, and b) selling its real estate, if necessary.

It slashed prices as much as 75% during the holidays, so it has already revealed to its customers that what it used to charge was probably not warranted. Those price margins are never coming back. And once it rolls cheaper merchandise in its stores, it can try to differentiate itself from Target, Kohl’s, and any of the other merchants who’re chasing those newly-minted bargain consumers. Different displays? Better employees? New programs? Again, not a word.

I just wonders if cheap stuff will make anybody want to shop there.

I just can’t see how Saks can avoid focusing on its store experiences — and all of the benefits, services, add-ons, etc. that working with that context allows — and still hope to possess the stores a year or two from now. Maybe it wants its customers to shop online, which makes it an even tougher business to differentiate from every other online retailer? 

But that sounds like instant department store packets to me.

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