Kristine
Starbucks is an immensely popular coffee chain across the country that seems to be expanding and growing constantly. Starbucks’ expansion efforts can worry independent coffee shop owners, who fear that the nationwide chain will steal their local customers. While this sounds like a valid business concern at first, researchers have actually reached a surprising conclusion: revenue for other coffee shops often increases when a new Starbucks opens nearby. This is one aspect of what has been dubbed “the Starbucks effect.”
Starbucks’ Industry Impacts
According to Harvard Business Review, “The success of Starbucks cafes has been good for coffee distributors all over the United States.” Starbucks’ products and ingenuity inspired other coffee brands to expand their flavor options, develop new coffee products, and focus on issues of sustainability. In other words, the innovations of Starbucks gave all coffee a greater cachet, which increased consumer interest and demand for premium products. When Starbucks was successful, so were other coffee sellers.
The impact of Starbucks stretches beyond the coffee industry, however. The physical location of a Starbucks store can also increase the value of nearby homes. Between 1997 and 2013, Zillow found that homes closer to the coffee shop increased in value by 96%, compared to 65% for average homes in the US. In Boston, home values increased by a shocking 171% during this period. Either people seriously love living near Starbucks stores, the retailer has an uncanny ability for identifying neighborhoods on the rise, or the familiarity of the brand makes the surrounding area more appealing to potential home buyers.
Starbucks and Covid-19
Before the pandemic, nationally-recognized coffee shops and small cafes alike were thriving. Now, according to Bloomberg, the number of coffee shops is decreasing for the first time in 9 years due to the pandemic. As smaller retailers were forced to close, larger chains like Starbucks, Dunkin’ Donuts, and even McDonald’s saw increased sales. These popular sellers had the ability to adapt quickly to sudden changes, which independent small business owners couldn’t keep up with.
The future is still uncertain when it comes to the ongoing legacy of the Starbucks effect. It’s hard to say whether or not the coffee chain will continue to benefit neighboring businesses after the pandemic is over, especially if smaller stores continue to go out of business. So, if you don’t want Starbucks to end up as the only coffee seller in town, be sure to support your favorite local coffee shops!
