Slog - The Stranger's Blog

Line Out

The Music Blog

« Uh oh, Chongo | Angel of History or: On Nuking... »

Tuesday, April 25, 2006

The Starbucks Effect

Posted by on April 25 at 10:12 AM

A good book came out this spring called The Wal-Mart Effect.
It’s reminiscent of Fast Food Nation in that the author, a thorough, former Washington Post reporter named Charles Fishman, digs down into the “Wal-Mart ecosystem” for lenghty anecodtes about the manufacture and sale of everything from lawnmowers to pickles to bikes to power tools to bacon cookers to boys’ shirts to salmon (Wal-Mart is the #1 purchaser of Salmon in the U.S. and buys 1/3 of the annual salmon that Chile—the #1 salmon harvester in the world—sells to the U.S.). Fishman uses his reporting to explain exacty how the $11 billion in profits retail chain impacts the economic food chain. It’s a fascinating peek behind the curtain el capitalismo.

What makes the book much better (more challenging) than the entertaining Fast Food Nation, though, is this: Rather than being a heavy-handed and predictable takedown of Wal-Mart, the book provides data and details that both praise Wal-Mart (lowers the overall rate of grocery inflation in the U.S. by 15 percent, cuts out wasteful packaging to the benefit of the envrionment, and yes, actually does create more jobs per county than it displaces when it moves to town) and condemn Wal-Mart (forces U.S. manufacturers to layoff U.S. workers and rely on exploitative and inhumane labor practices overseas, forces a downgrade in quality on manufacturers so that consumers are buying less durable goods, oh, and those new jobs, don’t pay as well as the jobs they displace.)

Anyway, I’ve still got one chapter to go, so I’m not sure what Fishman’s conclusion is. However, the book has been so even-handed and unopinionated to this point that I don’t expect him to break out a 10th-grade rant now.

Indeed, so far there have really been only 3 times when Fishman openly editorializes. And it’s not about Wal-Mart. In Fishman’s stoically, even-keeled book, he tells you exactly how he feels about 3 other U.S. compnaies. Southwest Airlines…and then…two Seattle companies: Amazon.com and Starbucks.

He loves Southwest Airlines (“Southwest staff members are not just cheerful, they are well-paid. The airline’s business model, the low prices they offer customers, doesn’t require our silent complicity in exploiting the very people who are taking care of us. There is no hidden universe of squeezed suppliers.)

Amazon and Starbucks, however, don’t rate so well. First, in a weird, off-hand, snipe, Fishman blisters Amazon.com: “As you can imagine, that process lags behind the real marketplace—the federal bureaucracy moves more slowly than Amazon.com.”

And—after saying that “the average product we buy from Wal-Mart costs less than $3”—Fishman bust Starbucks: “Starbucks is built on a customer philosophy exactly opposite to Wal-Mart’s, charging more for a cup of coffee than anyone would have imagined 20 years ago. The price of half the drinks on the Starbucks menu board is more than $3. A desire for indulgence has created the world’s most popular cafe.”

Anyway, it’s kinda weird that in a book—arguably about the most provocative company in the world—the two companies Fishman apparently finds irksome—irksome enough to break out of his objective tone for a half second—are our very own Starbucks and Amazon.



CommentsRSS icon

I can't believe I'm reading this, I read this book and thought almost exactly the same thing.

But his critiques of Amazon and Starbucks pissed me off. It's easy to bash Starbucks for being cheesy and marketed to people who'd rather burn their money than spend it wisely, but even though they can be pretty cutthroat about the placement of their stores, they exploded cafe culture in this country, they didn't displace it. Also, though they hardly pay a living wage, at least they're paying their part time employees health insurance (while the rest of us foot the bill for the insurance wal mart doesn't pay its employees).

And finally, it's about time that gay kids in Ritzville have a place to work that (at least in writing) protects them from harrassment because of their sexual orientation.

And regarding Amazon, his main critique is that it's "too innovative". Fuck him.

I do love southwest airlines tho.

Do gay kids in "Ritzville" really have more to worry about than gay kids out in the boondocks?

That's cool that he praises Southwest; they really are pretty great - in fact, they're the only company that Ralph Nader has ever endorsed, that I know of (not in the sense of having any kind of deal with them, just in the sense of praising them as a company).

90% of the "greatness" of Southwest is due to one thing: they hedged fuel. They saved $120 million last year by doing so, giving them an operating profit of $60 million. In other words, if they hadn't lucked out on hedging fuel, they'd be in the same boat as all the other airlines -- bankrupt, slashing wages and payrolls, cramming seats even closer, and whining like the rest.

The fuel hedge is over now. Now they get to play by the same rules as everybody else. We'll see how long they stay great.

The great genius of Starbucks doesn't have anything to do with coffee or "cafe culture". It has to do with discovering a way to sell 20-ounce cups of sweetened hot milk to grownups. A particular kind of grownup; a grownup who thinks a cup of hot milk is worth $4. The amount of actual coffee served there is trivial compared to the milk, sweeteners, flavored syrups, crushed ice, and whatever else they put in there. Some culture; a culture of babies.

Amazon I can't really complain about much, except for the exponential growth in flash and javascript schmutz they keep loading up their page with.

Ritzville, Washington, honey. Over the hill and through the woods lie the Boondocks. The Ritzville gay kid's basketball team plays the Boondocks team every year. And lose. Badly. At least they have a place to go and have a Venti Mocha with whipped cream and sprinkles afterward. Praise Him.

The Starbucks bashing seems odd. It's not exactly news that the two most successful business models these days are a) to be the cheapest seller, or b) to turn your product into a luxury/indulgence.

Yeah, Starbucks' model is the opposite of Wal-Mart's -- which is why Dunkin' Donuts' coffee-as-fuel marketing position is a good one. But only one business in any category can be the cheapest one out there (or a bunch can be tied) -- why not shoot for luxury when it obviously works across so many categories?

Well, slap my ass:

http://en.wikipedia.org/wiki/Ritzville

Thanks for the clarification... I'm in New Jersey.

Starbucks is not the luxury version of a cup of coffee. Starbucks is the luxury version of a McDonald's milkshake.

Fnarf, I wasn't saying that Starbucks is the shit because cafes are so awesome. I can't afford four dollar drinks, so I don't even go there. What I'm saying is that, in this measured, rational analysis of big business, one of this guy's only personal slams is Starbucks. Starbucks hasn't displaced pre-existing economies, all it has done in the US is create jobs while creating a new way to divert folks' discretionary income.

Just saying that when I read the book, his editorializing stung and felt really out of place, especially since the rest of the book was such a smart read.

Josh...thanks for highlighting this book, which I think I'll pick up and read.

These discussions always seem way more nuanced than we in Seattle like to believe.


Starbucks provides health insurance for part-time (20 hours a week) employees; I wish more companies its size would follow suit.

Oh lordy, the Jonathan/Katy "Ritzville" exchange in this thread was priceless! I am from Eastern WA and it never dawned on me until now that the name Ritzville (the very definition of irony) could be mistaken as a nickname for a Mercer Island(ish) community. Thanks for a much needed chuckle.

Please explain to me the difference between paying $4 for a designer coffee drink at Starbucks and paying $4 for a designer beer in a bar. Don't be such snobs.

Personally, I have no use for Starbucks coffee, but I have no quibble with their business model. I'll bet Starbucks employees receive better pay and benefits (and tips) on average than Wal-Mart employees.

FNARF, you are partially correct in that Southwest's hedging of fuel saved their profit margins this year. But they were doing quite well prior to their fuel hedging gamble. How? The point-to-point routing is far more efficient than the legacy airlines hub & spoke system; they pay their pilots, flight attendants, and other employees substantially less than legacy airlines (even after huge pay cuts), and pay no benefits (and therefor have no carrying costs for retirees). Not necessarily something to admire, but their success is not based solely on their fuel hedge.

Beer is a legitimate beverage for adults. Hot milk is not.

The fact remains that without the hedge Southwest would not be in profit, period. They look more efficient, and everyone is slobbering over them now, because they have that cushion that no one else has.

Speaking of airlines, you gotta love the proposal by Airbus to "some Asian carriers" to put in standing-room-only seats, basically padded boards you are strapped to.

The first question that always comes to my mind when people rag on Wal-Mart is, "how is this different from what K-Mart did in the 60s and 70s?".

sda, where can you get $4 fancy pants beer? I need directions!

ZIFX:

$3.50

I don't drink coffee, so I really don't know how good Starbucks' actually is. But they've successfully positioned themselves in mass consumer consciousness as a luxury beverage. Note the $4 price point.

"Beer is a legitimate beverage for adults. Hot milk is not."

Oh gee, thanks for clarifying. I'll remember that the next time I see a beer commercial with huge-breasted bikini-clad women, frat boys with the "party hard" mentality, and talking frogs.

I don't drink coffee, but my mother does. And one thing that the Starbucks phenomenon has done has greatly improved the quality and availablity of decent coffee out in places like Ritzville (which according to the Starbucks site, doesn't actually have a Starbucks). Because even if the smallish towns don't have a Starbucks, there's now a greater chance that they'll have at least an expresso stand in town. Which greatly improves the experience of travelling with my mother, who needs her morning coffee, but prefers to expresso to regular coffee.


"Beer is a legitimate beverage for adults. Hot milk is not."

You are quite the little dictator Fnarf! Any more dietary or other rules we need to know about? I hate to think what other illegitimate activites I might be doing without even knowing!

Yes. Fnarf's body of knowledge is quite remarkable. Perhaps Fnarf's relentlessly urgent and chiding tone is a consequence of having returned from the future and knowing how it will all turn out for the rest of us.

I'm thinking maybe this eerie reversal of time-space is indicated in Fnarf's pseudonym. Could it be Fran F?

Comments Closed

In order to combat spam, we are no longer accepting comments on this post (or any post more than 45 days old).