The REAL Reason Starbucks Is Failing

Starbucks known worldwide for its upscale coffee and cozy atmosphere it's become a household name but is the iconic green mermaid floundering the coffee giant is facing a real crisis customers are turning away sales are plummeting and the chain is falling flat in new markets in the third quarter of 2024 alone Starbucks's same stores fell 7% while the number of customers visiting its North American stores fell 10% what went wrong how did this once Unstoppable coffee Empire born in Seattle and belov it across the globe find itself on such Shaky Ground why are its once loyal

customers now walking away leaving stores emptier than ever on today's episode of the infographic show we're going to show you the real reason Starbucks is failing it's Saturday morning you just wrapped up a long list of errands and your energy is tanking fast you need a caffeine boost now perfect timing right because there it is your neighborhood Starbucks calling your name with the promise of your favorite latte it's been been a while since 2020 in fact back then Starbucks was one of the few places you could grab coffee and a snack during lockdown but today

is different you're in the mood to finally sit down relax and indulge in a great cup of coffee think about it you your favorite drink a cozy seat and some well-earned me time with your favorite book so you park and you walk into the store and that's when you realize things seem different the decor the music the noise Everything feels minimalistic clinical uninviting what happened to all the comfy little nooks you could sit in for hours instead of a bunch of cozy arm chairs now there's only a few uncomfortable looking wooden stools in front of

a counter by the window and a whole lot of empty space well it's not just your memory Playing Tricks on you most Starbucks stores did look different up until a few years ago in fact they built their whole business model on being a European style Cafe a welcoming third space It was supposed to be a place where people could gather socialize and work work for hours all while drinking coffee so what happened a lot of things but perhaps most importantly lockdown when you're business is known for being a place people can hang out together in

and a deadly virus starts leaping from person to person that is not good news for your company it's a disaster Starbucks realized that to survive the pandemic it had to focus on getting drive-thru and mobile orders so people could get in and out of the store fast by the end of 2023 the mobile app became so popular that 31 % of all purchases were made through it eventually many stores came to the realization that all that furniture the armchairs the tables the inviting spaces it wasn't being used like it once was instead it was taking

up valuable space and adding to cleaning and maintenance costs for little return so they threw it out in fact some Starbucks locations became drive-thru or pickup Only Stores meaning you literally cannot sit down in America's third space anymore according to CFO Rachel rary while only 1% of stores were pick up only in 2023 70% of Starbucks were drive-throughs many of them focusing more on drive-through customers than in store customers only 29% of Starbucks locations in 2023 were cafes but at least there're somewhere to sit so you walk up to the counter and you figure you'll

deal with the wooden stool the most important thing is that you get your delicious cup of coffee and soon good news there's only one person in front of you bad news she's ordering an iced venty caramel macchiato 15 pumps of vanilla syrup made with heavy whipping cream barely any ice one shot add whip extra caramel drizzle and if you're wondering yes that's a real order a Starbucks barista has complained about making you roll your eyes but at least it's just one order so you take this time to glance up at the menu and see if

you should try anything new you scan over the lists of hot coffees iced coffees Frappuccinos iced tea cold drinks wait how many options are there the Starbucks menu has now over 100 options and that's just for the drinks themselves there are also food items snacks and of course the dozens of drink add-ons like toppings and syrups that help to make Starbucks popular generally the more items your coffee shops offer the longer it takes to prepare everything at this point Starbucks has gone beyond its high quality coffee Origins and expand it to lemonades energy drinks and

more between the book length menu and another crazy problem you'll learn about soon weight times are worse than ever in 2022 almost 16% of Starbucks customers said their weights were longer than usual in 2024 over a quarter of them around 26% had the same complaint back to the store and good news you're finally at the front of the line and you wait and wait and wait you realize there's only two people behind the counter and they're working hard but they're not paying any attention to you where did the Baristas go well here's the first problem

mobile and drive-through orders now account for More than 70% of Starbucks sales across its 9500 company operated Us stores out of a total of 16,300 locations what started as a lockdown survival strategy designed to keep the business afloat when in stor dining wasn't an option may have been a little too successful and now it's coming back to bite them that's the conclusion Kate Lamberton a professor of marketing at upen Wharton School came to as well she told ABC news that Starbucks accommodated a global challenge with a solution that worked really well for a time but

they have to fundamentally rethink the value they offer so they don't become a quick surface fast food place as you wait you can't help but notice the Barista is furiously working on a seemingly endless stream of mobile orders you're standing there frustrated and according to Starbucks's latest sales report You Are Not Alone why should people who aren't even in the store get priority over those who took the time to show up it's a question more and more customers are asking and it's one Starbucks doesn't seem to have an answer for eventually the the Barista takes

your order without the usual coffee shop warmth personality or smile that you get at other independent cafes you take your receipt and you walk to the end of the counter and wait for your drink your relaxing weekend coffee shop stop has already stressed you out but if you think you're angry at the lack of Staff maybe it'll help to know that the Barista behind the counter is way more annoyed than you Starbucks conducted an internal survey at more than 10,000 Us locations turns out only 33% of its staff think their location has enough workers so

you have a 2/3 chance of ordering a coffee at the Starbucks where the workers are overworked overstressed and juggling a whole lot of tasks at once one former Barista wrote a less than flattering article about her experience at three different locations she said due to understaffing Partners like me were often doing multiple roles or positions at a time I often felt pushed to my limit and filled with Stress and Anxiety because we were short staffed during a shift and I couldn't keep up with customer demand back at the store you hear your name called incorrectly

because well Starbucks and you walk up to get your latte it used to be kind of charming when the Barista wrote satra instead of Sarah in marker on your cup but now there's just a machine print out of your horribly butchered name on The Coffee Cup yet another impersonal touch that's quickly turning you off of the store as you head to your stool something nags at you you realize you've never even checked the price of your drink but it's Starbucks it can't have changed that much since since your last visit a couple of years ago

right you take out your receipt and almost drop your coffee which you just realized you can't afford to do six bucks for a venty latte the average cost of a Starbucks latte in the US in 2020 was $3.95 in 2024 the cost has risen to $4.95 that's a 25% increase in Just 4 years in case Starbucks hasn't noticed customers all over the world have been dealing with inflation for a couple of years now people want good value and Starbucks isn't giving it one survey found that of the major North American coffee chains Starbucks ranked dead

last in price perception only 51% of Americans agreed it was affordable in comparison 74% of Americans agreed that Pete's Coffee and Dunkin Donuts were affordable 73% of Americans agreed the same for Dutch Bros customers used to overlook Starbucks's higher prices because they could drink it for hours in a welcoming relaxing environment as Professor Lamberton said Starbucks could charge a premium because it's a little bit special now they're charging 650 for people to walk in and walk out 10 seconds later in other words Starbucks took away most of the experience of being at Starbucks but wants

customers to pay even higher prices for it the problem is people willing to pay premium prices for a Starbucks like experience are walking right past Starbucks instead they're heading to Independent local coffee shops where the service feels more personal and the Ambiance more inviting after all why settle for the sterile standup only Vibe of most Starbucks stores these days when a nearby cafe offers cozy seating warm decor and maybe even a smile with your latte and there's a lot of independent cafes to go to over half of the market is made up of small business

shops while Starbucks experienced impressive growth from 100 total shops in the US in 1990 to about 16,500 locations in 2024 it actually increased the popularity of sitdown cafes overall the number of independent cafes shot up from 1,650 in 1990 to just over 65,500 in 2022 that is a lot of competition for Starbucks especially now that it's adopted the very model it once set itself apart from Once the go-to spot for a sit down Coffee House experience Starbucks has pivoted to resemble the quick serve coffee shops it originally aimed to disrupt people who just wanted to

grab a coffee and a snack for a decent price and walk out always had places like Dunkin Donuts and local Deli all of those coffees cost much less than an average Starbucks order so Starbucks isn't matching the prices of quick surf cafes while also not matching the quality and the environment of sit down cafes meaning it is doing absolutely nothing particularly well and the quality of the coffee in the environment has been an even bigger struggle for the company abroad Starbucks has failed to take hold in markets like Italy China and Australia the last of

which has a big Coffee Culture brought over by a Italian and Greek immigrants speaking of the chain isn't doing so great in the huge coffee drinking culture of Greece either with just 27 locations around the country mostly in high tourist areas why can't Starbucks compete in these markets it has high prices and most importantly it's new business model doesn't suit the local coffee cultures take Greece and Australia for example both have sitdown coffee Traditions that are built around socializing that the company doesn't offer anymore and it's costing them dearly in Australia the chain closed 61

of its initial 87 stores in case you're trying to do the math that's a 70% failure rate which cost the company $15 million in losses in China the story is a bit different a local competitor is destroying Starbucks in what could have been one of its biggest markets while sales in the North American Market slumped to the tune of 6% in the third quarter of 20124 in China they fell by 14% this mostly has to do with the rapid expansion of China's domestic company luck and coffee a value focused chain that opened up 8,000 new

stores in 2023 alone Starbuck's ambitious plans to open one new store every 9 hours in China fell apart after luck and blasted right past them in profits and growth back to you sitting at your local Starbucks where you're almost done with your coffee and you're ready to go you get up to leave and you notice a crowd of people gathered outside the store it's a group of employees from Starbucks Workers United asking for better paying benefits you sit back down feeling a little uncomfortable about crossing the picket line this has been the least relaxing coffee

shop experience of your life Starbucks's Public Image has taken a bit of a nose dive these last few years for a couple of different reasons but the most important one is the tension and resulting bad press between labor union Starbucks Workers United and former CEO Howard Schultz the company had a reputation for good pay and benefits for its workers it even had the Starbucks College achievement plan which covered 100% of tuition costs at Arizona State University for employees who were eligible for it but inflation has soared wages have not kept up and less people work

at each store meaning the workload is much higher than it was and the pay doesn't go as far as it did so in 2021 Starbucks employees started to unionize and even though by the end of 2022 only about 2% of the US Workforce of 250,000 people was unionized then CEO Howard Schultz took it personally very personally in May of 2022 when Schultz raised pay for company employees he specified that he wouldn't be raising the pay of unionized workers the New York Times asked him if he could ever embrace the union and Schultz said no this

did not go over well Schultz insists that his problem with the Union is because it pushes back on the idea that Starbucks is a model employer to be fair the company did introduce full health benefits for even part-time employees in 1988 it was also one of the first private corporations to include part-time workers in a stock option program but at the end of the day publicly fighting with labor unions goes against the progressive image the company has created wed Bush analyst Nick seon agreed historically Starbucks has been built as forward-looking and liberal when you're at

war with a labor union it doesn't necessarily jive with your brand identity not to mention strikes and other actions don't encourage people to walk into Starbucks locations there may be some good news on The Horizon as a new CEO is in charge after the recent Rocky 17-month tenure of laxman narasimman Brian niichel now known as a Fixit CEO after he got chipotle through some 2015 era corporate troubles has been called in to lead Starbucks he said he's listening to the complaints of his staff and his customers and has resolved to change a lot of the

structural issues at Starbucks nickel also seems to understand one of the company's biggest challenges at the moment in an open letter he stated he wants to return Starbucks to a community Coffee House which is undoubtedly better than the overpriced coffee from overworked barista's branding the company has now not to mention Starbucks still has 40% of the cafe market share in the US so things aren't completely over yet that being said the future still doesn't look bright in 20124 Starbucks stated that it expects its stores will underperform for several quarters and even nickel agrees that a

companywide shakeup can't happen overnight what was your latest experience at Starbucks like let us know in the comments Below in the meantime check out the real reason McDonald's is failing or click this other video right here