News flash: Starbucks expanded too fast.
Or at least, so says Starbucks founder Howard Schultz in a memo that circulated on the Internet recently. The chain went from 1,000 to 13,000 locations in a decade. As a result, Starbucks has gone from the epitome of cool — which it really was, back when grunge was the hip thing — to, well, Starbucks. I think I literally pass about 15 Starbucks on my way to work in the morning, and those are just the ones that are within half a mile of the highway.
And yet, it’s easy to forget that Starbucks practically invented the modern coffeehouse. When I was in high school, there were no hip coffeehouses to hang out in. If you wanted to hang out and gab with your friends in a public place, you went to the mall. If you wanted to drink coffee, there was the Folger’s brand dreck you buy at the supermarket, or there were fancy-schmancy imported European brands. The first Starbucks were a revelation. Great coffee, great eye for design, quirky attitude, and socially responsible too! (Or so we believed then.)
Daniel Gross wrote a fascinating piece in the L.A. Times this weekend about companies, like Starbucks, that expand too quickly and sacrifice their brand magic. Other case studies of the trend, according to the article, include Krispy Kreme, Restoration Hardware, Snapple, and California Pizza Kitchen. All once exclusive — nay, magical — consumer experiences, all blanded down by Wall Street’s push for ever-expanding profits. Remember the first time you walked into Restoration Hardware? It was awesome. Now? Not so much. I might add to this list The Sharper Image, Tower Records, Boston Market, the Olive Garden, TGI Friday’s, and IKEA.
Extend the concept to television, and you’ve got Seinfeld, Who Wants to Be a Millionaire, and Star Trek. Film franchises? All I have to say is that Lethal Weapon was considered edgy on its release in 1987. The Batman and Superman series fell into self-parody and both needed expensive reboots. (Star Trek is supposedly next in line for a reboot, with Matt Damon, Adrien Brody, and Gary Sinise reportedly in line to play the young Kirk, Spock, and Bones. I kid you not.) Books? I would argue that Orson Scott Card has screwed the pooch on the marvelous Ender series with his increasingly wretched (and seemingly endless) series of Bean books and tie-in stories. (I could even go so far as to suggest the United States is subject to this phenomenon as well, but I don’t feel like getting political today.)
I wrote about this phenomenon in Infoquake. In fact, this arc of rise, bloat, and fall is one of the principle themes of the Jump 225 Trilogy. It seems to me that this is simply the way the world works. Brands, like people, like companies, like everything, are only allotted so much time on this Earth. Marketplace pressures demand that they expand quickly, and then the same marketplace pressures will pull them back down again. Nobody has yet found the magical formula to extend a company indefinitely, just like nobody has yet found the magical formula to extend people indefinitely.
Think of the brands that have stood the test of time. Coke, Sears, J.C. Penney, Ford, KMart. The only reason Coke continues its market domination, I’m convinced, is because of the virtual monopoly on the soda industry it shares with Pepsi, and that mostly has to do with distribution. There’s not a major stadium or movie theater chain or fast food franchise in America that doesn’t carry either Coke or Pepsi products. Give consumers a real choice and I’m betting that many of them would opt for R.C. or Virgin. Sears and Penney’s will soon go the way of Montgomery Ward, and Ford’s and KMart’s futures aren’t exactly looking promising.
Other companies survive for a while by remaining boutique brands — the L.A. Times article mentions In-N-Out Burger and Trader Joe’s, two companies that have resisted the impulse to line their stores along every freeway offramp in America. But it seems to me that this strategy only has so much currency too. Keep your company small, and you remain more vulnerable to economic shifts and shareholder revolts. Keep your company family owned, and eventually the family dies off. Small missteps (which are inevitable) can have drastic consequences.
The brand that I find most fascinating to watch today is Apple. Somehow, they’ve gone from being the coolest thing on Earth (the original Mac) to a lame also-ran (during the Sculley/Amelio days) to the coolest thing on Earth again (iMac, iPod, MacBook, etc.). There’s no doubt in my mind that Apple will one day fall — and it’s probably going to be in our lifetimes. In the past decade, Steve Jobs has wisely steered the company towards a more exclusive brand strategy that seems to be working pretty damn well. Keep the prices high. Don’t quite fulfill all the demand. Emphasize the coolness factor. Keep your audience relatively small. Why else would Apple enter the cell phone market with a $500 base model that only the Cool People will be able to afford?
But what happens when Steve Jobs retires or goes to that big Trash Bin in the sky? What happens the next time he makes an expensive blunder and the suits push him out to make way for some bland, faceless middle manager?
For now, don’t let the rhetoric fool you: Apple is very happy where they are. People watch the series of “I’m a Mac, I’m a PC” ads bashing Windows Vista and think that Apple’s really going to steal a lot of market share from Microsoft now. But that would be Steve Jobs’ worst nightmare. He doesn’t want 85% of the desktop market, or even 60%; once Apple is no longer the cool, hip alternative, they become — well, Microsoft.
They become Starbucks.