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Unit 2: Different Layout & Designs

19. The last principle is of ................................. Notes
20. Superstores, hypermarkets and category killers rarely use ................................. displays.

Case Study Starbucks Corporation

Starbucks Becomes a Public Company

Starbucks’ initial public offering (IPO) of common stock in June 1992 turned into one of the
most successful IPOs of the year. With the capital afforded it by being a public company,
Starbucks accelerated the expansion of its store network. Starbucks’ success helped specialty
coffee products begin to catch on across the United States. Competitors, some imitating
the Starbucks model, began to spring up in many locations. The Specialty Coffee
Association of America predicted that the number of coffee cafés in the United States
would rise from 500 in 1992 to 10,000 by 1999.
The Store Expansion Strategy
In 1992 and 1993 Starbucks developed a three-year geographic expansion strategy that
targeted areas which not only had favourable demographic profiles but which also could
be serviced and supported by the company’s operations infrastructure. For each targeted
region, Starbucks selected a large city to serve as a “hub”; teams of professionals were
located in hub cities to support the goal of opening 20 or more stores in the hub in the first
two years. Once stores blanketed the hub, then additional stores were opened in smaller,
surrounding “spoke” areas in the region. To oversee the expansion process, Starbucks
created zone vice presidents to direct the development of each region and to implant the
Starbucks culture in the newly opened stores. The entire new zone vice presidents Starbucks
recruited came with extensive operating and marketing experience in chain-store retailing.

Starbucks’ store launches grew steadily more successful. In 1995, new stores generated an
average of $700,000 in revenue in their first year, far more than the average of $427,000 in
1990. This was partly due to the growing reputation of the Starbucks brand. In more and
more instances, Starbucks’ reputation reached new markets even before stores opened.
Moreover, existing stores continued to post year-to-year gains in sales.
Starbucks had notable success in identifying top retailing sites for its stores. The company
had the best real estate team in the coffee-bar industry and a sophisticated system that
enabled it to identify not only the most attractive individual city blocks but also the exact
store location that was best. The company’s site location track record was so good that as
of 1997 it had closed only 2 of the 1,500 sites it had opened.

Real Estate, Store Design, Store Planning, and Construction
Schultz formed a headquarters group to create a store development process based on a six-
month opening schedule. Starting in 1991, the company began to create its own in-house
team of architects and designers to ensure that each store would convey the right image
and character. Stores had to be custom-designed because the company didn’t buy real
estate and build its own freestanding structures like McDonald’s or Wal-Mart did; rather,
each space was leased in an existing structure and thus each store differed in size and
shape. Most stores ranged in size from 1,000 to 1,500 square feet and were located in office
buildings, downtown and suburban retail centres, airport terminals, university campus
Contd....

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