Is Starbucks at a Saturation Point?
There is truth to the belief that there’s a Starbucks on almost every corner. A recent study shows that there are almost four stores per one square mile. With the ubiquity of Starbucks, it is hard to imagine that the company might have reached a saturation point, but it seems that it has come to that point. The study also shows that not only are there Starbucks locations everywhere you turn, but that they are actually hurting each other’s business.
The over saturation of Starbucks is affecting its business and hurting sales. As existing customers tire of the older stores, when a new store opens the existing customer base in that area heads for the new store to check it out. The idea that adding more stores would result in an increase in sales, but instead shareholders are noticing stagnant sales.
From a commercial real estate perspective this means that some prime locations may be available soon. If Starbucks cannot sustain these extra locations and have them be profitable, then they may need to look at giving up some locations as they are not proving to be effective growth-wise. With a Starbucks on every corner, especially in major markets, there are sure to be some prime locations that many other businesses would like to have. Starbucks thrives on being everywhere that their customer base is (and being in areas with high foot traffic) so a location opening would be very attractive for many businesses looking for the same kind of traffic.
With the saturation rate growing for Starbucks over the past few years and what is looking like a peek now at 3.6 stores per square mile, it will be interesting to see if Starbucks will pull back its locations or come up with a different strategy to utilize all of the prime real estate they are currently located in.
When working with clients, this example of Starbucks overdoing their expansion can be used to help your clients make informed decisions about opening another location or multiple other locations. Looking out for your client’s best interest will help ensure that they will work with you when the time and location is right for their expansion.
Written by Nicole Brzyski for Coldwell Banker Commercial Affiliates