The reasons for Starbucks' success

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Founded in 1971, Starbucks is the world's largest coffee chain, with nearly 21300 branches around the world and more than 2000 stores in China alone, with a success rate of almost 100 per cent.

What is the secret of this location system? Let's hear what Starbucks China executives have to say.

Determine the location first, then the city, then the area.

The development of Starbucks in China is first through the layout, and then to the location. In terms of layout, Starbucks' strategy is to expand from first-tier cities to second-and third-tier cities.

According to domestic urban geography and economic factors, Starbucks divides the Chinese market into five levels, from large to small expansion. First-tier cities, such as Beijing, Shanghai, Guangzhou and Shenzhen, will give priority to settling in, and only when they form a certain degree of influence and popularity will they expand to second-and third-tier cities.

The so-called tactics is to determine the city first and then the area. When Starbucks decides whether to enter a city, it will consider the following two aspects:

1. Starbucks targets high-and middle-income people with higher education, so it will analyze the urban population before determining whether to enter or not.

2. After determining the target city, according to the planning and geographical characteristics of the city, the whole city is divided into several regions, which is called mini-market. In each mini-market, Starbucks will be further subdivided into several business circles and functional areas, and then select the location according to the priority order.

Six key points of Starbucks location Strategy

1 pay attention to the effective passenger flow and find the gathering point

It is possible to be selected only if the flow of people reaches a certain number. After selecting the business area, Starbucks will measure the effective passenger flow, determine the main flow lines, select the gathering point, and use the location not far apart as the location of the store. Because on the main flow line of passenger flow, it means that the flow of passengers per unit time is the largest; the location of the gathering point means that the crowd will gather and stop here.

2 identify the target customers and target the middle-and high-income people with higher education

Chinese mainland is aimed at middle-and high-income people who pursue taste and fashion, and the overall age group is about 16 to 45 years old. Only when the consumption strength and life taste of the consumer groups in a region are in line with Starbucks' positioning, Starbucks will conduct further investigation according to the specific requirements of the location. three

Pay attention to visibility, shop window is the best signboard

Whether consumers can see Starbucks stores, store signs and windows at a glance when walking down the street is very important for stores to attract customers and revenue growth.

Although Starbucks currently has high brand awareness, the competition in the coffee industry is very fierce. In order to maintain this advantage, the display of the brand is very important, and good visibility is the favorable display of the brand.

(1) advantage of store location

(2) clear orientation of shop moves.

(3) through the attraction of the window and the scene, the people in the window are the scenery in the eyes of the people outside the window; the people walking outside the cupboard window are the scenery in the eyes of the people in the window.

4 pay attention to the convenience of transportation, there is traffic flow, there are more sales opportunities

The convenience of transportation and the accessibility of store sites are important conditions for consumers to choose. The number of parking spaces, the radiation area of the business area, and the number of parking spaces in the radiation area are seriously considered by Starbucks. The purpose of this consideration is to increase the rate of guests entering the hotel.

5 centralized store opening to reduce distribution costs

When Starbucks was founded, it opened two stores face to face on the same street, which is a taboo for general chains. Opening a store may have high sales, but there is no guarantee to make money! The logistics cost of many products is very high, especially Starbucks pastry, which requires seamless docking at minus 18 degrees.

Although the sales volume of a single store is high, the operating cost is also very high, so Starbucks will open its first store in a certain place in the future, and reduce logistics costs by increasing the number of stores, so don't expect to enjoy Starbucks alone. Conversely, the possibility of whether the city continues to open stores is also an important basis for Starbucks region selection.

From the perspective of competition, opening a store in areas where high-quality consumption power is concentrated can enjoy the market alone and exclude competitors.

6 mature environment brings long-term stable benefits

Starbucks believes that opening a store requires a mature and stable business environment; a mature and stable business environment can enable stores to generate stable revenue to ensure the growth and stability of corporate revenue.

Choosing a store with a mature economy and a stable business environment has become particularly important at Chinese mainland; Starbucks learned this lesson on Starbucks: Starbucks opened a store in a city because of investment from a city government. Starbucks has made very good profits in its two years of operation.

But from the third year, due to the change of the leadership of the local government and the re-planning of the city, the subway was built near the store due to planning changes, and walls were built around the store, so customers could only enter the store through the aisle, which led to a sharp drop in store revenue.

As the subway construction will take five years to complete, the store has become the only Starbucks store in China operating at a recent loss. At one point, Starbucks headquarters considered whether to close the store. They thought: "if we enter this business circle 2-3 years later, we may be able to avoid this problem, and it doesn't matter if the rent is a little higher."

Location strategy and store competition

1 the choice of street corner

"when we first started to dominate the world for Starbucks, we had to compete fiercely with bagel stores, video stores, and especially other coffee shops. In the United States, everyone likes the location on the street corner, but it always comes into our hands in the end. " This is a statement that Starbucks store opening department is proud of.

Starbucks measures the average level of local education (well-educated people are more likely to visit Starbucks), average family size, average income, the number of cars passed within about 200 meters of the store to be selected, the proportion of people during the day and night, and a lot of other data.

According to Starbucks location guidelines, Starbucks regards itself as an obstacle that can not be bypassed in people's daily life, rather than allowing people to change the path of their usual habits.

This strategy enables Starbucks to achieve the highest possible visibility of its location. According to Rubinfield, which plays an important role in Starbucks' development, it is a "surprise to passers-by." therefore, Starbucks's ideal location is the location of the street corner of "the intersection of two main roads".

2 stores should be on the right side of the driveway

If you drive in the direction of the city center, you will notice that almost all Starbucks stores along the road are located on the right-hand side. why?

The Starbucks store department has long recognized that it is time-consuming and laborious to turn left and stop in front of Starbucks in heavy traffic. If you come out and turn left again and return to the same direction, this U-turn will make people feel that they may violate traffic rules and be deterred from Starbucks. Opening each store in the right-hand direction of the driver will allow customers to enter the store and spend money, making it more convenient to buy lattes.

3 be good at choosing neighboring stores

In the United States, Starbucks likes to locate its coffee shop next to a video store or a dry cleaner? Because this will double the contact area of potential customers in Starbucks stores, Starbucks knows that coffee shops can attract a certain percentage of accidental pedestrians to enter the store to spend.

Customers of video stores and dry cleaners usually have to go back and forth twice, first putting things down and then picking them up again. Therefore, every time potential customers come to rent DVDs, they may have two opportunities to buy Frappuccino.

The following is an excerpt from a speech given by Starbucks Executive Chairman Howard Schultz at Tsinghua University on April 11:

It is a great honor to be here today. I know that Tsinghua has invited many outstanding people to give speeches. Tonight I'm going to try a different style of speaking, and I'm going to challenge all of you.

Starting with the Starbucks shareholders' meeting three years ago, I asked a very important question about our shareholders and employees. This question has been on my mind for a long time, and in the world we live in, there are constant changes, not only the business, but also the world itself. For profit-making listed companies, what kind of role should it play and what kind of responsibility should it bear? Is it all about making money? Add value to shareholders? Or do you have to struggle to strike a balance between profit and conscience?

This is the core issue that I would like to discuss today. In 1987, Starbucks had only 11 stores and 100 employees. Our dream is to build a different company. The company not only wants to build a national brand, but also shows unprecedented characteristics, and leaders can travel with their employees all the way and share success with them.

As your dean said, we are the first company in the United States to provide employees with comprehensive health insurance and equity in the form of options. That was before we went public. At that time, many people thought that these benefits reduced shareholders' rights and interests, and it would not last long. What we thought then, and what we think now, is that only the success that can be shared is the best success.

Today, you have to do business in a very different way, very different from what it used to be. In 1987, we had only 100 employees and 11 stores and wanted to build a different company. Today, as the dean said, we have more than 25000 stores in 75 countries, we have 330000 employees, and we had 91 million customers last week.

So the question is, how does a company that sells coffee and paper cups, which sells large and small cups or Italian that most people can't read well, and sells for only $3 or $4 per cup of coffee, give benefits that no one has ever given before? from only 11 stores in 1987 to 26000 today, with a market capitalization of nearly $90 billion, how did it do that?

The same problem is that a company that opened only one store in China in 1999 now has 2637 stores, serves 5 million customers a week, employs 40, 000 people, and today unveiled a plan that can be said to embody Starbucks' iconic values, culture, and codes.

This plan shows who we are. All businesses, no matter what products, services, industries, countries, must truly define their core purpose and the reasons for their existence. We announced in Beijing today that we will launch medical insurance for serious illness for employees' parents from June 1, which is defining our core purpose and reason for existence.

Why are we doing this?

Why does a company spend millions of dollars to provide insurance for employees' parents? The answer to this question can be traced back to 1987, which is that not all business decisions have to consider whether it is cost-effective. In fact, I would say that many of the decisions made by Starbucks have nothing to do with value for money, and some do the opposite. We took shortcuts more than once, which is the main reason why Starbucks has been able to maintain its financial success.

The truth is that if you want to build a long-term business in today's environment, the basic principle of success is trust. As managers and leaders, our responsibility is to do better than our employees expect, to build trust with them, so that they can do better than customers expect.

Where did this philosophy, values, culture and rules come from? First of all, I would like to say that we are definitely the best coffee maker in the world, our real estate portfolio is probably the best among the retail enterprises in the world, and our interior decoration is second to none. The quality of coffee, the real estate mix, the interior decoration and the level of operation are all excellent, but these are all secondary to the foundation of the company. The foundation of an enterprise lies in culture, in behavior, in the way we act. Believe it or not, this cultural value actually began when I was a child.

I grew up in Brooklyn, New York, and lived in public housing. You may have all heard of the American Dream, the promise of the United States that people's social status is not immutable in the United States. Well, when I was 7 years old, I came home from school one day, and my father's job was very bad. It was probably the worst for me when I was 7 years old. He was driving diapers, and there were no Pampers diapers at that time. One day in March 1960, when it was still winter and cold, he slipped on the ice and broke his thigh and pelvis. In the United States in 1960, if you were just a rough worker who suffered a work-related injury, you would be fired. My family had no income and no insurance, and at the age of 7, I saw with my own eyes the fragmentation of the American dream. I watched my parents get discouraged and the whole family collapsed. The trauma I suffered when I was seven years old continues to this day. Despite these successes, the childhood fear of failure, insecurity and vulnerability persists to this day.

Compassion, sensitivity, respect and dignity are common to all. If we want to build an evergreen enterprise, we have to do business in a different way. There is a connection between people because of their values, which attaches importance to people's values. In fact, we did the whole thing backwards. The most important thing is no longer shareholders, but our employees, followed by customers, and then shareholders. In June 1992, Starbucks went public with 125 stores and made a profit of 1/4. The market capitalization at the time was $250 million. I felt as if I had won the lottery. I called my mother and said, "Mom, we did it. Our American dream has come true. 250 million dollars!"

Twenty-five years later, Starbucks' market capitalization has risen from $250 million to nearly $90 billion. If you see our success and ask how we succeeded, I can tell you personally, it's not because I have an MBA degree, I didn't go to an MBA (laughter), nor because I have a business degree, which I don't have either. I may not be able to graduate if I want to go to business (laughter). I have a lot of experience in life.

No matter where I go or what I do, I try my best to keep my curiosity. What I want to say to you is that you must maintain a strong thirst for knowledge. Curiosity about the world, curiosity around you, curiosity can make you learn from all kinds of people and experiences, and the effect will surprise you.

"I'm here because of you."

For example, six months ago, Starbucks was preparing to open its first store in South Africa. I've never been to South Africa. I'd love to. We went to open two stores. After the opening, there was a long queue in front of the door, and people would queue at the door for two hours to get in for coffee. I've been to a lot of Starbucks opening ceremonies, but I've never seen anything like this in my life. No advertising, no promotion, just send a message: Starbucks is open.

Two days before the official opening, I did what I always do and sat down and talked to the young people who were about to wear Starbucks work aprons. Many people think that the best thing Starbucks does is marketing. We are not a marketing company, our marketing is very bad (laughter). The reason I say this-- I know there must be people who don't like it (laughter)-- is that we build our brand on the in-store experience, which is the emotional connection between people, that is, the relationship between our employees and our customers. The essence of the Starbucks brand lies in employees who wear green aprons. So I'm going to sit down and talk to people in Johannesburg, South Africa, who are about to wear green aprons and our brand.

I sat down with 15 young people and asked each one to tell me a story. The first thing they talked about was the living conditions in the town. How many people here have been to South Africa, please raise your hand? not much. How many people have seen what the town looks like?

As I said just now, when I was a child, my family was very poor and lived in public housing. When I went to see these towns, it was really sad, and the level of poverty and living conditions were worrying. However, those young people are in a good state of mind, happy and grateful, all because of their families. When they tell me their stories one by one, I always hear them say an African word I've never heard before, and many of them are saying it. Finally I plucked up the courage to ask them, "which word are you talking about?"

"Ubuntu".

That's the word they've been talking about. I asked them what the word meant, and they rushed to tell me that "Ubuntu" was a word Mandela had used many times, meaning "I am because of you because of you".

If there is anything worth remembering in my speech tonight, I hope all of you here will remember the word "Ubuntu" and "I have you".

Selflessness, sharing, responsibility to others, realize that you, like those around you, are aware of the meaning of a team, and truly understand that only shared success can drive everyone forward.

Before listening to them talk about it, it's not that I don't know the meaning of Ubuntu, but I don't know how important the word is to them and how to use it in Starbucks.

This morning, we sat with a group of Starbucks partners-- we called our employees partners because all employees were owners-- and many of them brought their parents. We do this because we have met with the parents of our partners every year in China for the past five years. Instead of talking about sales, income, profits, stock prices, but as a family holiday, we express our gratitude and respect and let parents see that we are aware of our responsibility to take care of their children.

At the meeting this morning, we wanted to figure out what would happen if the partner's parents got sick or died. We did a survey a few months ago and found that the benefit that Starbucks Chinese partners want most is to be able to take care of their aging parents.

We all shed tears this morning because we heard such a true, fragile and courageous story, their worries that their parents would not be able to take care of themselves when they were old and sick. In China, you experience a lot of things that we can't experience in the United States. That is the responsibility of each of you to honor your parents and grandparents. It is not that there is no such thing as filial piety in the United States, but that you have to bear this kind of responsibility for the rest of your life.

As a company, how can we stand idly by? When we hear these stories and hear these requests, how can we be bystanders? We have to do something. So we announced this plan today, and like everything Starbucks has done in the past 47 years, it's a milestone. The reason we do this is that we are not operating in the Chinese market as an American company, but a Chinese company, so we have housing allowances, we have employee shareholding, and we have worked with the Soong Ching Ling Foundation over the past 10 years. These things are not marketing, not media public relations, but the essence of a company's culture and values.

As I said earlier, not all business decisions depend on whether they are cost-effective. In the future, you will graduate from school and start your own business, which may become a kind of pressure, pressure to make money, pressure for listed companies to issue quarterly reports. The hardest thing to do in building an evergreen enterprise is to take a long-term view.

Many of the decisions you have to make may involve 5, 10, 15 years from now, making seemingly unconventional and unorthodox decisions in accordance with the core purpose and reasons for existence. How many of you have read about what we did against racism in the United States? How many people have seen it? Is that all you have? Okay. Have you ever read in the newspaper that we are going to hire 10,000 refugees around the world? Why are we doing these things? How many of you understand that we offer Starbucks employees a free four-year college education in the United States through Arizona State University? how many of you know?

This brings us back to the core question: what kind of responsibility do listed companies have to bear today for profit?

Pursue performance through human nature

I firmly believe that our core responsibility is not just to make money. In fact, I would say that we are a company that pursues performance through human nature. When I sit in the boardroom and have a weekly meeting with senior executives, I feel that there are two empty chairs in the boardroom. I've always thought that there are customers in one chair and Starbucks partners on the other. I keep asking myself whether we can make our customers and partners proud of what we argue, the decisions we make, the strategies we take, and whether a decision can make our customers and partners proud. If we take the wrong position in the argument, they won't be proud of it. Decisions made to make more money in the short term will make them even less proud. In that case, there is no doubt that we made a mistake.

I'm sure there are no words like "love", "humanity" or "compassion" in your textbooks, and I'm sure many business school books don't have these words. What I advocate is that compassion, compassion, humanity, and love are fundamental to building an excellent and long-term enterprise. I have to say that in most cases, if the culture and values of the company can not be unified to these qualities, then it will be very difficult to attract and maintain customers.

You have a good strategy, you have a corporate culture, and you have established values and rules, which brings a lot of trust. Employees believe in mission, and managers and Leader show real service leadership every day. So nothing can stop you.

From Starbucks in 1987 to Starbucks now, how did we grow up from then to today? How do we get coffee to Chinese who used to have little coffee? Of course, we do have excellent coffee and excellent shops, but what really matters is that our relationship with our customers is based on culture.

As for today's business environment, I have to say that on the one hand, it may be easier to obtain capital than ever before, but on the other hand, the competition is too fierce, there is too much interference, it is very difficult to succeed. What determines the success or failure of an outstanding strategy and evergreen enterprise? I dare say that I am by no means the smartest one in this hall. The main reason for Starbucks' global success is that the culture and values we create are universal. We have stores in China, Japan, the United States, Europe and Mexico.

We work with companies we trust and respect, and we come to work wholeheartedly. It is because of "Ubuntu" that you have me.

Service leadership

I am thinking about the challenges facing the enterprise. What can we really share? What obstacles do we have to overcome to succeed? People have said many times that Starbucks can't do it. China is an example. We opened a store in 1999 and lost money for many years. Many people in the United States say that it is time for Starbucks to close its doors in China. Our success everywhere is not overnight, but we insist on believing in our core purpose, keeping our promise, and doing everything possible to put our employees first. We realize that if we can't do what our employees expect, we won't be able to do what our customers expect. We understand that culture, values and codes are in many cases as important as strategy, or even more important than strategy.

In other words, if the culture itself is weak, confidence is broken, and employees do not believe in the mission, goals, and leaders of the company, then the greatest strategy in the world is not sustainable.

Starting a company, especially at the beginning, is like raising a child. You will be in the stage of learning and memory, and each company has its own memory. There will be early behavior, setting the direction, showing the true meaning of service-oriented leadership.

How many people have heard of service leadership? I want to hear someone say it out loud, what exactly is service leadership?

"serve others." is there anything else? You're all the smartest kids in the country. "help others succeed".

How many people want to work for service leaders? Please raise your hand. We all want to work for such people (laughter).

How many people think that leadership is inborn, please raise your hand; how many people think that leadership is acquired? It seems that you are indeed the smartest people (laughter).

Indeed, leaders are made. Many important moments make leaders, and life experiences make leaders. All of you have different life experiences and have their own stories. There will be more than one kind of leadership.

There was only one Steve Jobs. You must decide what kind of person you want to be and find out who you are. Leadership has many characteristics, many experiences and even many textbooks will give the definition. But one trait I want to say, which I feel overlooked, is the courage to show a vulnerable side, especially for men.

It is difficult for men to show their vulnerability in front of a large group of people. Cry, repent, apologize. What I've learned over the years is that the more vulnerable you are, the more people will approach you. So showing your vulnerability is a leadership trait that I want you to accept.

Being a leader doesn't mean you have to have all the answers. In fact, asking for help is a force. If you want to build a great company, you need to gather around people with similar ideas, people who are smarter, more experienced, more skilled and better than you, but you must have similar ideas.

I believe that all of you here have your own dreams and ambitions to make parents proud of what to do to go out from one of the best universities in the world. Let's talk about dreams.

Over the past 34 years, a lot of people have told me, "I wanted to do the coffee business like this." (laughs) really? So what did you do? I did it before you. (laughter) Don't let anyone tell you that your dream can't come true. When I talk to young people, I always tell them to have big dreams and think bigger and bigger. Take disappointment and failure as opportunities to learn more. Don't give up, don't refuse.

All of you here have the ability, the skills and the opportunity to do something great. No matter what your dream is, stick to it and don't follow what others think. When you succeed, think back to "Ubuntu". You can sit here today because someone has helped you in your life. No one can sit here all by himself. Give back to your community, your family. Keep learning and seek knowledge.

Let me tell you one more story.

I am a Jew and I will go to Israel when I have a chance. For many years, I had a mentor who taught me a lot. He was a rabbi.

One day he told me the story. The focus of the story is not on Jews, but on humanity. He told me about an incident that happened in Germany during the Holocaust.

Many men, women and children are packed in tankers and transported to concentration camps. In the cold winter, you have to endure a day or two on the way to the concentration camp. They were stuffed in a tanker with no windows, no food, no place to go to the bathroom. When we arrived at the concentration camp, as soon as the car door opened, it was very cold outside, and there was a man outside who would give every six people a blanket. The person who gets the blanket has to decide whether to use it myself or to share it with the other five. Most people will separate the blankets.

What I'm going to tell you today is that no matter what you're going to do in your life, wherever you're going, share your blanket as much as you can and share it with five other people, Ubuntu.