Starbucks announced yesterday an expansion of its Starbucks Delivers service, bringing it to the U.S.
The company expects to expand the service to a quarter of its corporate-operated locations by early next year. It's had Starbucks Delivers in China, working with ecommerce giant Alibaba and Ele.me, an on-demand food delivery platform. The company already tested the service in Miami and Tokyo, partnering with Uber Eats.
It's a good deal better PR than incidents earlier this year involving mistreatment of people based on race and even once because a customer stuttered. But you've got to wonder whether this is an innovative scheme or an indication that a business model has matured and needs a different strategy direction.
There are new directions companies take as opportunities to get beyond where they've been. The delivery move is a bid to catch up to what business once was. The company started working on Starbucks Delivers in China with Alibaba, which brewed the coffee in its Hema grocery stores, and Ele.me to perform the delivery. Starbucks was trying to inject life into slowing growth.
Part of the slowdown was competitor Luckin Coffee, which went from zero to 500 stores in under a year. New customers got heavy discounts and people could pick up coffee after paying for it online or have it delivered. So Starbucks is trying to pick up pointers from a new competitor.
China is a critical market for Starbucks, as it is for many companies. The country has offered a great way to boost business, but its economy is slowing which has worried many businesses that depended on the markets there.
U.S. delivery is similar in some key ways. Starbucks already seems to have stores on virtually every corner. They sell their products through other retail chains, like Barnes & Noble. You can get Starbucks coffee beans and bottled brew at grocery stores. How many more places can they appear?
Not enough, particularly when it seems that every food business is ready to sell you a fancy variation on coffee. Starbucks cut its long-term earnings forecast in an investor meeting on Thursday, which is when they announced the delivery service expansion. The company will do flat same-store sales, an important indicator in retail because it shows how ongoing business is doing.
The story is a microcosm of a business problem many don't want to confront. To bank on never ending growth is dangerous. Every business eventually reaches a point of maturity, where it's getting as much of the market as it might reasonably expect. That's why the average lifespan of an S&P 500-listed company is 20 years, down from 60 years in the 1950s.
This is one reason companies spend so much time in mergers and acquisitions, even though something like 70 percent of corporate takeovers don't deliver the value the people in charge said would be possible. But when investors want continued growth, executives will find ways to deliver it, even if not in an organic manner. Even when the results are a bit of a dodge that may not even reach the combined performances of the individual companies.
You can't bank on your business always continuing to grow without end. Looking for high growth early on is fine, but over time, start thinking like a business grownup. Consider how you're going to sustain things over the years, keep customers satisfied and employees in work. Redefine success around reality, not wishful thinking.