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Retail Store Management

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areas, or busy neighbourhood shopping areas convenient to pedestrian foot traffic. Only
a select few were in suburban malls. While similar materials and furnishings were used to
keep the look consistent and expenses reasonable, no two stores ended up being exactly
alike.
In 1994, Starbucks began to experiment with a broader range of store formats. Special
seating areas were added to help make Starbucks a place where customers could meet and
chat or simply enjoy a peaceful interlude in their day. Grand Cafés with fireplaces, leather
chairs, newspapers, couches, and lots of ambience were created to serve as flagship stores
in high-traffic, high-visibility locations. The company also experimented with drive-
through windows in locations where speed and convenience were important to customers
and with kiosks in supermarkets, building lobbies, and other public places.
To better reduce average store-opening costs, which had reached an undesirably high
$350,000 in 1995, the company centralized buying, developed standard contracts and fixed
fees for certain items, and consolidated work under those contractors who displayed good
cost-control practices. The retail operations group outlined exactly the minimum amount
of equipment each core store needed, so that standard items could be ordered in volume
from vendors at 20 to 30 percent discounts, then delivered just in time to the store site
either from company warehouses or the vendor. Modular designs for display cases were
developed. And the whole store layout was developed on a computer, with software that
allowed the costs to be estimated as the design evolved. All this cut store-opening costs
significantly and reduced store development time from 24 to 18 weeks.

A “stores of the future” project team was formed in 1995 to raise Starbucks’ store design to
a still higher level and come up with the next generation of Starbucks stores. Schultz and
Olsen met with the team early on to present their vision for what a Starbucks store should
be like—”an authentic coffee experience that conveyed the artistry of espresso making, a
place to think and imagine, a spot where people could gather and talk over a great cup of
coffee, a comforting refuge that provided a sense of community, a third place for people to
congregate beyond work or the home, a place that welcomed people and rewarded them
for coming, and a layout that could accommodate both fast service and quiet moments.”
The team researched the art and literature of coffee throughout the ages, studied coffee-
growing and coffee-making techniques, and looked at how Starbucks stores had already
evolved in terms of design, logos, colours, and mood. The team came up with four store
designs—one for each of the four stages of coffee making: growing, roasting, brewing,
and aroma—each with its own colour combinations, lighting scheme, and component
materials. Within each of the four basic store templates, Starbucks could vary the materials
and details to adapt to different store sizes and settings (downtown buildings, college
campuses, neighbourhood shopping areas). In late 1996, Starbucks began opening new
stores based on one of the four templates. The company also introduced two mini store
formats using the same styles and finishes: the brevebar, a store-within-a-store for
supermarkets or office-building lobbies, and the doppio, a self-contained 8-square-foot
space that could be moved from spot to spot. Management believed the project accomplished
three objectives: better store designs, lower store-opening costs (about $315,000 per store
on average), and formats that allowed sales in locations Starbucks could otherwise not
consider.For a number of years, Starbucks avoided debt and financed new stores entirely
with equity capital. But as the company’s profitability improved and its balance sheet
strengthened, Schultz’s opposition to debt as a legitimate financing vehicle softened.

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