[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

ChannelAdvisor:
Online Selling Strategies
Offerpop:
Social Marketing Campaigns
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[19 comments]

Stop & Shop and Giant Closing Starbucks Kiosks

September 2, 2009

By George Anderson

In the scale of things, having 43 kiosks inside supermarkets shut down is probably not one of the bigger pieces of bad news that Starbucks has had to deal with in recent years, but it's still not a positive.

Stop & Shop and Giant Food have decided to shut down just under half of the Starbucks' kiosks in the respective chains' stores. The closures, which began last month and will be completed by mid-September, will affect kiosks in 26 Stop & Shops and 17 Giant locations.

"It was a business decision we arrived at with Starbucks," Faith Weiner, a spokesperson for Stop & Shop, told The Patriot Ledger. "We did a business review together, and we decided these kiosks were not performing at levels that were acceptable and would allow them to continue to operate."

After the closures, Starbucks will have 56 kiosks in Stop & Shop and Giant stores. Five others are expected to open before year's end.

Employees manning the kiosks worked for the supermarket chains and will be offered other jobs with the companies.

The chains are looking to replace the kiosks in some instances. A number of Dunkin' Donuts will spring up in Stop & Shop stores when Starbucks moves out. Ironically, Starbucks replaced many Dunkin' Donuts when the kiosk deal was first signed with Stop & Shop in 2006. Van Houtte coffee kiosks and others with Green Mountain coffee will also open in Giant and Stop & Shop stores that previously served Starbucks.

"We know that customers do like to have coffee when they shop," Ms. Weiner told The Patriot Ledger. "It’s a nice convenience. We continue to try to figure out what the best way is to offer that option to customers."

Discussion Questions: Are coffee shops or kiosks in stores as big a deal as they were a few years back when Starbucks and other premium coffee brands were at the peak of popularity? Is the failure of the Starbucks kiosks more about the coffee retailer and its product or the chains where the kiosks were located?

FINANCIALS:     [NASDAQ:SBUX]

Discussion Questions:

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How important are coffee shops or kiosks to creating the type of customer experience that supermarkets and other big box stores are looking to create?

Comments:

Sounds like Ahold is doing their due diligence. The perimeter departments in stores MUST deliver good sales and profit levels to maximize the margin mix. When they do not it is time to find the next new opportunity.

No doubt the recession has hurt the entire coffee-out-of-home business with Starbucks suffering the biggest backlash. The only caution that I would offer to Ahold is, be sure you look at the store demographics closely before shutting down a kiosk--the economy will bounce back!

[Image of: View Braintrust Panelist button]
J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

I am not sure this is a situation where they are closing the Starbucks because of the experience; the fact may be that there are other more profitable, engaging uses of the space.

Mark Johnson, President and CEO, Loyalty 360

I do not agree that coffee options while shopping is a critical step in the decision process of choosing a store, but I would really like to understand if Stop & Shop--whose locations sit in the middle of Dunkin' Donuts' backyard and strongest market--chose the wrong brand to align themselves with when they went with Starbucks. This may have nothing to do with the shopping experience for Stop & Shop but a better reflection of offering a brand not considered the first choice in coffee.

Charlie Moro, President, CFS Consulting Group, LLC

This is a good move for Stop & Shop Giant as well as Starbucks. Here are some of the reasons why:

1)Starbucks is a high-end coffee chain that customers expect to see trained barista's working at. When you have grocery employees manning the Starbucks kiosk you unfortunately lose some of that experience a Starbucks trained barista brings, hurting both Starbucks and Stop & Shop Giant. If customer experience is not what is expected from a Starbucks, customers will not return.

2) If customers enjoy drinking coffee while shopping (I do) why not offer a cup of a retailer's Private Label coffee for .25 cents at the entrance. There are several coffee dispensers today that keep coffee fresh while not needing a full time person serving. This does two things. It allows a shopper to enjoy a fresh hot cup of coffee for .25 cents and at the same time lets them try the retailer's Private Label brand coffee. Setting up a display of the Private Label coffee they are drinking would be another added bonus.

3) Starbucks is not just a cup of hot coffee, which is what most shoppers at a grocery store are looking for. It is an experience that Starbucks needs to protect and keep consistent with all its stores. When a customer enters a Starbucks you can smell the coffee, you can feel the positive vibe from other customers, the music is relaxing and the service from professionally trained baristas is outstanding. Not only that but the seating is designed for customers to sit, chat and catch up with old friends or network and do business. When a customer is entering a grocery store they are looking to get in and get out. Far from what Starbucks is looking to offer.

[Image of: View Braintrust Panelist button]
John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

To me, the opportunity here may be to take a localized approach to outside partnerships. Just as retailers are now targeting higher-end products and brands to the markets that will support them (rather than rolling them out to all locations and hoping everything rolls up to a decent number), the same should hold true for outside partnerships. One market's Starbucks may be another's Dunkin' Donuts.

[Image of: View Braintrust Panelist button]
Carol Spieckerman, President, newmarketbuilders

My initial reaction to George's question "...Are coffee shops or kiosks in stores as big a deal as they were a few years back?..." was no, they are not. Then I read the rest of the article and learned that Stop & Shop is in fact replacing the Starbucks kiosks with either DD or another coffee concept in most of these stores. So it sounds like they still believe in coffee--just not Starbucks coffee? At least not in these stores? Sounds like more of a tailored assortment exercise than abandoning the coffee kiosk concept.

[Image of: View Braintrust Panelist button]
Ben Ball, Senior Vice President, Dechert-Hampe

One has to wonder if this has nothing to do with which brand is right, but rather which company will pay the most rent or percentage of sales.

Rather than this being a profit center, why not use coffee as a way to improve the customer experience and drive loyalty? What if you swiped your loyalty card for a free cup of coffee and at the same time receive targeted coupons? Who knows, maybe companies would even pay to be the official coffee sponsor?

[Image of: View Braintrust Panelist button]
Doug Fleener, President and Managing Partner, Dynamic Experiences Group

Experience is the ultimate branding tool. And shoppers are the ultimate czars of what works and does not work in branding. I truly hope the retailers took some time to query the customers about their satisfactions and desires in the coffee area. I agree with many who said here already that Starbucks kiosks with a grocery clerk at the helm isn't really the Starbucks folks expect. But it may be just a brand swap opportunity, and clearly private label or local favorite Dunkin' Donuts can deliver a satisfactory experience for less cost.

Personally, I don't require or desire coffee while shopping, so it's a walk-by regardless of the situation. If the shoppers told the retailer this, then they better be listening to what the shoppers would find more useful.

I for one wish grocers would partner with dry cleaners and save me a trip I need to make every other week and wholly dislike!

I'll sign off with my mantra--Never be afraid to ask and then Listen to the Shopper!

[Image of: View Braintrust Panelist button]
Anne Howe, Senior Vice President, Shopper Solutions, part of Acosta Mosaic Group

It's important for retailers not located in the Northeast to avoid over-reacting to the news that Stop & Shop and Giant are closing some of the Starbucks kiosks. Consider:

1, This is home turf for Dunkin' Donuts.
2. Sometimes, non Starbucks employees working in Starbucks kiosks do not pull it off quite like it's a "real" Starbucks.

For example, in a recent visit to a Starbucks kiosk one of the "baristas" told a customer that they do not honor the Starbucks gold card only after telling her also that she would need to "go over there" to put her own "Equal" in the latte.

[Image of: View Braintrust Panelist button]
David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

I understand the reasons for closing the Starbucks, for the same reasons that other contributors have cited, and applaud Stop & Shop for having metrics in place to evaluate performance. What has always struck me with any supermarket coffee shop is very few of them capitalize on the opportunity to cross merchandise their in-store baked goods. It's a natural and will contribute to greater revenues per sq. ft. and margins.

OR, perhaps to turn the prime location into a quick serve check out where staples are merchandised, thereby alleviating the lines on the express check lane.

Sam Horton, ****, FMCG Guy

This is clearly a Starbucks issue and not a category issue. Their brand is significantly less relevant to significantly more and more customers, whether in Stop & Shop and Giant or in their freestanding stores.

If they were switching to some other category kiosks that's one thing but given that some are switching to other coffee brands, this seems like a brand-specific problem, albeit for both companies.

[Image of: View Braintrust Panelist button]
Phil Rubin, CEO, rDialogue

Starbucks is not about its coffee, it supposed to be an experience. As several respondents have noted, it is difficult, if not impossible, to duplicate that experience inside a supermarket. New England is Dunkin' territory and their position is based more on their coffee (and doughnuts) than the Dunkin' "experience" and likely a stronger partner for someone in that market.

[Image of: View Braintrust Panelist button]
Steve Montgomery, President, b2b Solutions, LLC

Grocery Stores, like their cousins in the Department Store business, learned long ago that a portion of their stores are for "lease." Getting a growing, and fair return per square foot is important.

In addition, with the ubiquitous locations of coffee shops in certain regions, the Grocery Stores loss the Unique Selling Proposition that they, and every other Marketer, has to deliver.

Limited loss to the Consumer. And, undoubtedly a better use of space for the Retailer.

[Image of: View Braintrust Panelist button]
Roger Saunders, Managing Director, Prosper Business Development

Sure, coffee's still a solid "nice-to-have" as an amenity for grocery shoppers, but is it a "must-have"? No. In the case of Stop & Shop Giant, consider where they are; New England and in particular, MA, the home of Dunkin' Donuts, an extremely entrenched brand. So, I'm sure Stop & Shop Giant either got or has feedback or numbers to support their move. Or, it could be simply a gut brand decision. Either way, there'll still be a "nice-to-have" coffee spot, just a different brand for the home of DD. Everywhere else could be a totally different story.

[Image of: View Braintrust Panelist button]
Lee Peterson, EVP Creative Services, WD Partners

Most grocers I know simply give away coffee as a courtesy for the customers. That sort of makes Starbucks redundant. A new Kwik Trip opened up nearby and they are giving away any size or flavor of coffee or cappuccino. Seems to me it would be rather foolish to pay for something other retailers give away for free.

Starbucks in the grocery store wasn't really Starbucks. Many don't accept Starbucks gift cards or offer WiFi. Many are just a small make-shift kiosks wasting valuable floor space.

David Livingston, Principal, DJL Research

Kiosks take up space and do not foster immediate sales. Coffee shops are valuable when space is available. Stores selling better coffees such as Starbucks should vigorously, with appetite appeal graphics, promote the joy of a great cup of coffee WHERE SHOPPERS CAN MAKE A PURCHASE. This provides what shoppers want.

Sandy Miller, President, Miller Zell

Some of the comments seem to suggest that Starbucks is out of business in Stop & Shop and Giant. What is reported is that less than half of the kiosks are closing and the retailer is adding more Starbucks.

Maybe the decision is just smart retailing by the Ahold. Perhaps it is all in the demographics? Upscale stores get Starbucks while downscale stores get DD.

Does the coffee kiosk itself make sense? Not likely if the only measure is how many $2 or $3 cups of coffee are purchased. But, if the shopper with the cup of coffee ends up taking a more leisurely stroll in the store, that inevitably leads to more sales.

Then there is Wegmans where the coffee kiosk always has a line....

[Image of: View Braintrust Panelist button]
Gene Detroyer, Professor, Independent

Things change and customers like it. Our team is replacing hundreds of McDonald's stores with Subway shops in Walmart stores. Replacements refresh, and that appeals to customers overtly and subliminally. Subway instead of Mickey Ds? Refreshing. Dunkin' instead of Starbucks? Refreshing.

[Image of: View Braintrust Panelist button]
M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

Stop & Shop should replace the kiosks with a charity that sells coffee, etc, to raise money for their local causes. What a coup for the stores and the goodwill created.

[Image of: View Braintrust Panelist button]
Tony Orlando, Owner, Tony O's Supermarket & Catering

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters