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WILL WE SEE MORE STARBUCKS CLOSINGS?

Starbucks announced store closings, which signaled some people to start sounding the alarm that fevered times are upon us. In New York City, it may not be a big deal since on many corners if you don’t like one Starbucks, just cross the street to a different one. A whopping 84% of GlobeSt.com readers believe we’ll see more Starbucks shuttering their doors, while the rest of voters think Starbucks will stay the same. Jeffrey D. Roseman, executive vice president and principal of Newmark Knight Frank, believes the little coffee shop from Washington state may have a few more tricks up its barista sleeve.

“The Starbucks that will close are the ones that have directly impeded on an existing store. Quite frankly, I don’t think there are that many of them. Closing 600 stores sounds like a lot, but they have 14,000 stores internationally and domestically. It’s not a ton of stores.

“The media are playing it up as they do. I have no agenda either way. I don’t do business with them. It’s a story obviously, but it feeds into the self-fulfilling prophecy of the economy and the market. Obviously we are in a tough time now.

“New York is probably doing better than most of the other areas because of the number of people in New York and volume of traffic. Starbucks is doing well in the New York City stores. The volumes in New York tend to be better than anywhere else in the country. My guess is New York will be the last place they close. They’ll probably have a few closings but I think less than in other markets. I think it’s going to be fairly spread out.

“Starbucks’ thinking was sound. Their real estate strategy was sound. Speaking for New Yorkers, a New Yorker will only walk X number of blocks for a cup of coffee. They won’t cross over a big street like Broadway or 42nd Street. While the stores look like they’re close together, there are distinct traffic patterns.

“It’s going to be a little bit of a rocky road for some retailers. I don’t think any market is ‘over.’ It’s not that they’re not doing well in other markets, they’re looking to trim the fat a little bit. If a second store opened not far enough from another store and the profits haven’t reached a certain level, those are the ones that are going to close.

“Truly we haven’t seen many companies like Starbucks in our lifetime get as big as they got so quickly. Other companies do retrench or close a couple stores to get leaner and meaner. It’s not uncommon to do. That’s why some companies have kick-out clauses in their lease. They want the right to close it if it’s not doing well.

“Clearly, they took their eye off the ball a bit and got too big too fast. They might admit that. When you have growth that they have had, it’s hard to maintain, stay organized and attract the best labor. Getting bigger is tricky for any company, not just retail companies. It’s hard to manage growth in any business. Not many companies are able to not go through some downtime. Because they realized it and caught it, they may not be any worse for wear. Starbucks has just an unbelievably unique advantage over any other retailer I know, which is their interaction with their customers. Their customers are loyal customers, to say the least. They see the same customer seven times a week, sometimes twice a day. Once they are able to do other things better like sell food, it’s just an unbelievable model.”

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