Are You Making These Starbucks Mistakes?

Sometimes a company can really get surprised. 

Like what happened to Starbucks.

Here is a company with 23,000 locations located in 50 different countries.

With this many stores in operation you’d think they have this “moving into a new market” all figured out, right?

Wrong.

Check this…

Around the year 2000 Starbucks wanted to get in on the $3 billion coffee market in Australia.

So they ripped a page out of Walmart’s play book and went for the “shock and awe” strategy and opened up 85 locations right away.

The reaction from Australians? 

Crickets.

The sudden arrival of Starbucks in such a big way was not well received.

Australians took it as a brand invasion from another money grabbing multi-national corporation.

The thing Starbucks didn’t realize was just how much independent coffee shops were already part of the fabric of Australian culture.

Aussies prefer independent coffee cafes over large chains. They have a strong sense of buying local and the various cafes offered lots of different experiences whereas Starbucks only offered one.

Also, Australians are quite particular about their coffee and considered Starbucks not only high priced but inferior.

Their menu was heavy on US-style creamy sweet drinks and black coffee whereas Aussies preferred milk-based coffees.

So finally in 2008 after not being able to make any headway, StarBucks called it quits.

They shut down 66 stores, laid off 700 employees, racked up $143 million in losses and sold the remaining locations to the owners of the 7-Elevens in Australia, who now license the Starbucks name there.

It’s interesting to see how big companies who do well in one market can get hammered when moving to a new one.

I see it happen all the time with successful carpet cleaning companies who move into the area rug cleaning market.

On paper the concept seems like a natural fit. I mean area rugs and carpets are not that dissimilar.

Yet what the carpet companies fail to take into consideration is just how different people feel about their area rugs as opposed to wall to wall carpets.

Area rugs have history, art and sentimental value all woven into them which tends to make them irreplaceable to the owner.

So given the personal value a rug holds for an owner, who do you think they would trust to care for their rug…

  • The big carpet cleaning company who happens to clean area rugs?
  • Or the company that specializes in only cleaning fine oriental rugs and knows a lot about the history of the rugs themselves?

Right, it’s no contest – the specialist. Much like how you would choose a brain surgeon with 20 years of experience to operate on your head instead of your general practitioner.

And here’s another thing. 

When it comes to specialists, we always expect to pay a higher price because we KNOW the specialist has the expertise will solve our problem and we’re willing to pay for it.

Carpet cleaning companies have a certain mindset when it comes to pricing.

It tends to be cost driven.

It’s a hard mindset for them to break out of and be able to embrace the specialist pricing model where $10+ sqft is normal.

So they end up fighting over the low price end of the market with everyone else.

That’s generally when I get phone calls from them complaining they can’t make the area rug cleaning work.

They complain about how they’ve spent a big chunk of money on training, space and equipment but can’t get their investment back.

I’m not surprised.

Just like Starbucks discovered, you can’t expect a new market to embrace your way of doing business. 

Markets don’t adapt to service providers. Service providers have to adapt to the market.

I know because I started in this industry as a carpet cleaner. And when I transitioned into area rugs I was met with more resistance than you can imagine.

But I persevered.

I slowly figured it out and have got it down now to a science.

So much so I dominate my market and have taught others how to do the same in theirs.

Now it’s your turn.

http://mentorship.rugbadger.com/rl-modules/

Stephen “Dusty” Roberts