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Do consumers have to buy your goods and services?

July 7, 2008

As Starbucks beats a retreat from several main streets and malls, it’s relevant to point out the perils and dangers inherent on the “Starbucks Model”.

Building out a single concepts at a rapid rate has been the formula that’s grown many a successful American enterprise.

However, Starbucks was one of the first to do things differently, it built out a mass-premium brand and then became fixated on the idea that its premium had such stickiness, it could resist recessionary pressure.

It’s not surprising considering the addictive nature of caffeine, but there comes a point in time when consumers start  to do the math; a $5/per day habit is $1300 annualized.

When you start to think of it that way, there are other things that could use that money, like gas, for example.

The venture capital companies looked at Starbucks with envy and searched for other premium concepts they could scale-up to a national footprint.

A new segment emerged called fast casual, to cater for all those consumers who were going to “trade-up” to better experiences. The same happened in other categories like home furnishings with new mass premium entrants arriving on the scene.

Obviously, luxury is under threat, but it’s the relatively new mass premium space that faces the greatest threat of all because it was to supposed to siphon dollars from middle class consumers who wanted a taste of the good life.

It now appears those same consumers are starting to question the value of let’s say a PF Chang’s experience, over a local Chinese take-out or perhaps even a Trader Joes’ stir fry.

Posted by Ed Cotton

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