Starbucks Mailbag #1
AUGUST 28, 2006 | Over the years I’ve been asked a lot of questions about Starbucks strategies and decisions. In TRIBAL KNOWLEDGE, I share many of my thoughts from experiencing the strategies devised and the decisions made firsthand. However, I couldn’t share every thought because the book would have become too choppy and too wayward.
Hmm … choppy and wayward? That’ll make for great Tribal Knowledge blog fodder, eh?
So, every month from here on out, I’ll be answering some of the Starbucks-related questions I’ve been asked over the years. And if you have a burning Starbucks-related question but never knew who to ask, use the contact form and ask me. My answer to your question might appear in a future Starbucks Mailbag posting.
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Our first question comes from Blythe Christopher de Orive. Bkyth asks, "Who came up with the brilliant idea of marketing CDs at the counter? Was it synergy between the record companies and Starbucks or can you trace it to one individual?"
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[My answer] Not sure this can be traced to one specific individual … more like a trial/error process than anything else. Starbucks has tried to sell many different things at the counter from finger puppets to hard candy to granola-like bars. The real estate space at the main POS (point of sale) is extremely political (and highly profitable) with lots of discussion behind the scenes at Starbucks.
The decision to sell CDs at the POS most likely came about because (a) CDs sell well as an “impulse buy” and (b) the increased visibility of music CDs at the POS helps to promote Starbucks as a player in the music business.
But another reason to consider is “shrinkage.” No, I’m not talking about George Costanza shrinkage but rather, the type of shrinkage where inventory shrinks due to theft from customers or employees. Starbucks loses a lot of CDs to theft because they lack security screeners and because they merchandise CDs on racks in out-of-sight corners in its stores. Think about it, every music retailer has security screeners to reduce theft. Not Starbucks. Since its stores are heavily trafficked, it’s pretty easy to swipe CDs without a Starbucks barista (employee) noticing.
However, when you place CDs at the main POS where a barista is deployed it becomes more difficult to steal a CD.
Next time you see a used CD store located near a Starbucks, riffle through their CD compilations section. Chances are very high you’ll notice many Starbucks/Hear Music CDs still in pristine shrinkwrap condition.
And know you know the rest of the story. (Wait, I can’t use that line. Someone else has dibs on it. Drats.)
Posted in Notes & Updates
I was at the Starbucks Support Center during the birth of CDs at the counter. As I recall, we were always looking for new products that fit well within the coffeehouse Third Place Experience.
For those of us old enough to remember, coffeehouses in the ’50s and ‘60 were about music and poetry, not coffee. So music was a perfect match for the Starbucks Experience. And Blue Note Records, Starbucks first music partner, was a great values fit. The Marketing Department hired a musicologist, and Blue Note CDs began appearing in the stores.
Posted by Lewis Green on August 29th, 2006 at 6:35 pmYep, the Blue Note CD was the beginning of Starbucks involvement in selling CDs as part of its merchandise assortment. And Tim Jones played the role of instigator to make the music thing happen within the Starbucks third place environment.
The recent emphasis on selling CDs at the POS is interesting as the small CD rack displaced promotional signage and squeezed out some confectionery goodies. I’m not sure how much revenue CDs placed at the POS brings Starbucks, but it must be significant enough to merit placement at the POS.
A few Christmas seasons ago I remember intense discussions about the selling of Finger Puppets at the POS. One side felt the Finger Puppets were so far removed from a coffee moment that they should be removed altogether from the stores. The other side was operating under the fact that the Finger Puppets must mean something to someone otherwise they wouldn’t contribute $1MM in revenue during the six-week Christmas retail selling season.
If Finger Puppets at the POS retailing for $2.95 can bring about that much revenue then one can only wonder how much revenue CDs can bring at the POS.
Posted by johnmoore on August 29th, 2006 at 8:15 pm