I recently become aware of two great coup happening in Starbuck’s land. Both of which will have a ripple effect through the business community…but probably not how you think.
The first one being some inside information from my local Starbucks manager I heard this week. Starbucks will be discontinuing their breakfast sandwiches starting this fall. I think this is a huge mistake on their part and I bet is being made by some recently hired corporate executive from the fast food chain industry. Sit in a Starbucks on any morning and see how many people order those sandwiches. How many of them are business people or regulars who probably double their spending at Starbucks because of that sandwich? A lot (I have done this field research).
I only go to Starbucks now because of those sandwiches (personally, I lost the taste for Starbucks coffee after an extended trip to Italy two years ago). The reason is rooted in the fact that now that McDonalds is serving premium coffee they don’t want to be seen as competing with them. I find this thinking ridiculous; unless those sandwiches are adding less to their bottom line than my back of the napkin field calculations have come up with, this decision will hurt Starbucks more than it will help them.
The second one I read about this morning, Starbucks Switches to Free AT&T Wifi , or will be starting this spring. As all road warriors will know, Starbucks is the go to location for getting on line while on the road. There have been times that I have spent more time at starbucks in a day that I did at my hotel. As they break away form their 6 year relationship with T-Mobile, this changes will have multiple economic ripple effects:
- T-Mobile will be taking a huge hit to their bottom line. The majority of their 8900 wifi locations in the US were at Starbucks’ 6800 company operated stored (from Starbucks PDF Fact Sheet). T-Mobile’s wifi business will just about starve if they don’t strike a deal with some other retail outlet. Not to mention that most T-Mobile customers I know that have a T-Mobile phone have it primarily for the discount on the wifi access, which they use mostly at Starbucks.
- AT&T will gets a huge boost to their Wifi business (their bottom line is so large, I’m not sure how much of an immediate impact this will have.). With costs much lower for the service than T-Mobile, and Starbucks debit card holders getting 2 hours of free access per day, and with all 100,000 US Starbucks employees getting free wifi access, and with the service eventually being expanded to AT&T wireless customers, let’s hope that the AT&T infrastructure is able to handle this better than it has been handeling their Uverse roll out (which isn’t going smoothly, I hear).
- Starbucks should see a boost to their debit card transactions since holders of those cards get free wifi. This has trickle through to the credit card companies as they process the transactions for these cards, and of course take a percentage fee. (I believe Visa is the processor behind these cards, so this boost in revenue will help with their upcoming IPO).
It’s amazing how interconnected the business decisions at this scale can become. One just has to be able to look past the headline and connect the dots.