19 NOV 1100
Well, this morning has been full of strange happenings.
Some of the corporate-culture homogenization stuff came up in Economics class earlier, it interested me quite a bit to hear people's opinions on it, though of course it was a short tangent from the 'real' subject matter of the class, which I don't even believe Polo is that interested in. I don't think he BELIEVES the commonly accepted nuts-and-bolts trade theory; he spends far less time talking about the theory than he does in refuting it. It's interesting.
Since we're supposed to post our thoughts and ideas on this webCT discussion board, and I've been rather negligent in doing so, I'm going to write my brief response for that forum first. It's a fragment of the larger 'editorial' I want to write about the REAL benefits of homogenization, American consumerism, and corporations.
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Starbucks, economies of scale, and human contact:
Today, I pick on Starbucks, one of the most obvious examples of this trend I can think of. Lacking milk and honey, Portland, Oregon has become the land of beer and coffee.
The number of coffee shops here per capita is staggering; I could walk from my on-campus apartment to a different coffee shop daily for a month, never visiting the same one twice.
The market is dominated by the ultimate representation of corporate homogenization and consumer culture: Starbucks. The building's green facades litter the landscape, all promising the same atmosphere, the same coffee, the same black and green uniformed employees.
What do they offer the market? What's their niche?
Whether they introduced people to the concept of gourmet coffees, selling Double Grande Skim With-Whipped Lattes and Triple Venti Caramel White Chocolate Mochas to people who may have otherwise bought something far less polysyllabic in the past, is irrelevant.
My recent quandary: How do they get a bit of business? Why does ANYONE patronize their establishment?
If I knew the answer to this, I might be one step closer to a revelation that would let me at least comprehend American consumerism, if not change it.
Standard microeconomics would suggest that any market is controlled by a positively sloped supply curve and a negatively sloped demand curve. Clearly, the number of Starbucks in existence, the rate that the corporation has expanded, and the high price they command for their products indicate that they operate at quite a high point on their supply curve; demand, and so price, is high.
But why?
If the coffee market were to be in a state of perfect competition, it would be impossible to sell something above the market price; all firms are price takers, because the large number of small firms selling identical products are all too small to affect the price each consumer is willing to pay for the good.
The less competition exists in the market, the more economic profit is made by the industry, at the expense of consumers.
How much competition exists in the Portland coffee shop market?
There are plenty of coffee shops in the area, and while Starbucks is clearly the market leader, independent coffee shops are plentiful. Among the list of shops within a couple of miles of downtown, I frequent the Meetro, Cafe Bella, Vivace, Anna Bananna's, Coffee People and Coffee time, and there are plenty more; single independent shops and local chains, like Tully's and Peet's and Stumptown.
For me, 'getting a cup of coffee' is more than a drink, of course. I greet Baristas at my favorite shops warmly, I talk to them about things we left off about the previous time I visited. I know their names, and they know mine, some of the time -- I'm not so good with names, I'll confess. But they and I have a friendly, personal relationship that couldn't be replaced by a machine. This only makes it worse the times I have been in a Starbucks. "I have an Americano on the bar for ... Taylor?" It's Tyler. There's no 'A'.
Vivace is built in an old house, complete with an upper floor offering a little more privacy, comfortable couches and coffee tables. Bella is cozy and always pleasantly warm against the Portland rain. The Meetro has high-backed arm chairs and a wide selection of magazines and newspapers available to read. Anna Bannana's smoking-tolerated basement is always available if you're an addict to more than one stimulant, or fancy a game of cards or Trivial pursuit.
And then there's Starbucks. Each one has the same hard, uninviting chairs, the same bolted-down tables with 'chessboard' patterns printed on top of them. Until past two in the morning, at Coffee time you can usually hear the sporadic clicking of chess timers, the occasional voice declaring 'check.' I'm awful at chess. I've never seen someone play at Starbucks.
Despite the availability of alternatives, thousands visit Starbucks. We know economies of scale exist in this industry as in any other; clearly Starbucks's size should allow them to achieve lower costs. If they could do this, and pass that savings on to consumers through lower prices, then their position as the most popular coffee retailer would make a lot of sense.
But they don't.
Now, I'll admit, this is no official research paper, and I don't have all the numbers. Somehow, that triple venti caramel white chocolate mocha bug has never bitten me. I'm content with Americanos. For illustration I'll use a sixteen-ounce double. At
the Meetro, I'd pay about $1.50 for it, $1.60 at Vivace, and $1.75 at Bella.
Same thing at Starbucks? Set you back two bucks and a nickel. That's an increase of between thirty and forty per cent.
How is it possible to command that price? Perfect competition assumes identical products, and of course that's rarely the case. True, a Toyota is more expensive than a comparably equipped Daewoo. Does Starbucks sell BETTER Americanos then its competitors?
Well. The Meetro uses Portland Roasting coffee, a fair-traded and certified-Organic product. Stumptown's organic, too, and several of the other local shops sell Torrefazione, another name brand now owned by Starbucks. Anecdotally, the Torrefazione shops kick out an Americano that I can't tell apart from Starbucks's, and the Organic coffees taste subtly better, not to mention my ethical approval with their business practices.
At some Starbucks locations, you can pay for wireless internet access. It's free at Coffeetime. At Starbucks, you can buy a gift-card, which works just like a credit card for buying their products. They even offer to 'refill' the card when you've used all the money on it. Does the 'frequent customer,' who turns their good-anywhere cash into Starbucks-only money get cheaper coffee in return? Nope. But at each of the independent coffee shops I mentioned, there are frequent-customer cards that allow you a free drink after you purchase your tenth coffee or so. If you want espresso in Portland after nine at night, I could tell you a handful of places that are open until as late as two-thirty in the morning. They're not Starbucks, though. They close at about eight. Fresher, cheaper pastries and food items also make some of the private shops stand out.
HOW, then, do they get their business?
WHY would anyone plunk their money down at a Starbucks, day after day?
I just don't understand.
So, you tell me: why's that mermaid so special, anyway? How does she rate that these guys get to charge more, provide less, and profit so handsomeley?