The Quality vs. Quantity Debate: Starbucks as a Case Study in Regional Coverage vs. Quality of Service

February 6, 2009 at 11:33 pm 1 comment

starbucks-2

Beth Vanni

Beth Vanni

Today’s headlines add to the growing “chicken little” reaction to the U.S. economic woes….   “Starbucks Cutting More Jobs, Closing Stores.”   Now, I’m a pretty loyal Starbuck’s customer (sometimes two Venti ice teas a day!), but also a 25 year channel analyst.   And, my reaction to this headline was a candid “Well, of course they are!”

The facts of this news release I think lend themselves to a fitting analogy around a common vendor challenge in the technology space, i.e., how many channel partners is “enough”?  When do you have enough capacity and coverage with your regional channel partners to service your market(s)?  When do you refocus your efforts on diversity of services and customer satisfaction provided?

The Starbucks facts are as follows – the company will close 300 underperforming company-owned stores worldwide and will open 160 fewer stores than its previous targets in 2009.  The company will also eliminate ~700 corporate and non-retail positions globally.   But, hasn’t Starbucks been at a break-neck retail store expansion rate steadily for the last five years?  They now have nearly 20,000 outlets globally (corporate owned and licensed) and have been growing that number exponentially year over year.    Case in point – I live in a small, rural town of 40,000 and we have two Starbucks.  And as I travel to Silicon Valley regularly, there are at least 10 retail locations in the short 4-5 miles I drive from my hotel to our offices – sometimes two within ½ mile of each other!

That massive drive for coverage and local presence forces me to think about some vendors who have been on a partner recruitment tear lately – VMware, Dell, Symantec, Oracle.  As some of these companies have launched new technologies or acquired others, it makes sense that they would be on a coverage expansion effort.  But, when you get to a global partner count of over 40,000 channel partners (in the case of Symantec), one has to wonder how often these vendors are requalifying their partners, purging the underperformers and continue to align end-user needs with local partner coverage.   To harken back to the caffeine world, hasn’t Starbucks been closing underperforming stores regularly for the last 5 years?   Isn’t that just part of being in a volume, consumer products world?

Looking closely at coverage and capacity is a highly under-valued operational discipline in many high-tech companies.   I would also assert that when high tech companies have a regular discipline to evaluate this, there’s a lot less volatility in the ebbs and flows of partner recruitment – think Netapp.    But, more importantly, as high tech vendors move to more regularly evaluate the quality of partners and redefine what value-added services should look like, it helps all involved ensure that there’s alignment between the end-user’s expectations, the local market needs, the capabilities of the partner and the service needs of the vendor.   Did you all know that the breadth of services a full-featured Starbucks store can offer (beyond the basic coffee and tea products) now include:

  • Coffee-making appliances and accessories
  • Breakfast foods (new – to compete with McDonalds)
  • Ice cream, chocolate and coffee drinks sold in Supermarkets
  • Gift merchandise – mugs, stuffed animals,
  • Music & movies (production and resale)
  • Books
  • Gift cards
  • Coffee/pastry delivery services for companies
  • Wi-fi internet access and work spaces
  • Meeting spaces (in some locations)

As companies continue to move from closely analyzing the quantity of coverage to the quality of coverage through partners, it will benefit vendors to explore how to use their existing partner footprint to continue to push for higher value services and customer impact.   Local relationships between customer and partner will remain local.  But, isn’t it better to have a smaller partner community with deep, value-based services than a broad community with few services?     While you ponder that one, order yourself a latte ……

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Entry filed under: Industry Perspective. Tags: , , , , , , , , .

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1 Comment Add your own

  • 1. Gary  |  February 24, 2009 at 8:47 pm

    Spot on Beth – I see you haven’t lost a step in simple explanations of the otherwise complex 🙂
    Have a great year!

    Gary
    SATO America

    Reply

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