I recently saw an article on CNBC.com about how Starbucks is competing with itself. Starbucks has opened so many stores that, according to BMO Capital Markets Research, there are now “3.6 Starbucks locations within a one-mile radius of the typical Starbucks in the US.” That is up from 3.3 in 2014 and 3.2 in 2012. New Starbucks stores typically perform very well. However, analysts believe much of this business is cannibalization from nearby locations.
Do Americans really drink that much coffee? If so, it would seem we are always on a caffeine buzz. I myself don’t drink any. I do drink tea and I do go to Starbucks from time to time for Teavana tea (never Chai Tea Latte!). I am a Starbucks Gold customer, mainly because I share my card with my wife and son. In my suburban community and on my suburban commute, which is basically a straight line of about 11 miles, I pass 1 Starbucks and there is one across the street from my office. However, I could easily divert to at least 6 other locations without losing more than 3-4 minutes on the say to work.
More telling, we were in New York a couple weeks ago, staying at a hotel on the Upper East Side. I got up on a Sunday morning and went for a cup of tea to the Starbucks 1 1/2 blocks from the hotel. It was about 7:30 a.m. and the sign on the door said the store was to open at 5:30. But it was not open! Not to worry, my Starbucks App directed me 2 blocks up and 1 Avenue over. But that store also missed its 5:30 opening (what’s up Starbucks?). The App directed me back down 1 block and over 1 more Avenue and that Starbucks was open. I could have gone on for blocks and for dozens more locations if necessary.
Starbucks is not alone in this coffee craze. On my commute, I directly pass 4 Dunkin Donuts, just in case I need a sugar high before work (and a nap a few hours later). I could easily divert to at least 5 other Dunkins with no significant time lost.
As Dunkin says, “America Runs on Dunkin”. What we in real estate need to say to Starbucks and Dunkin is that Landlords run on Dunkin and Starbucks!