Starbucks customers are turning away from the popular coffee chain, frustrated by its declining appeal amidst dropping profits and increased competition.
Howard Schultz, who led Starbucks as CEO for 24 years across three different periods, has finally spoken up about the company's financial troubles.
Schultz Calls for Renewed Customer Focus at Starbucks
Howard Schultz, the former CEO of Starbucks, has publicly addressed the company's current challenges. Writing on LinkedIn, Schultz emphasized the need for Starbucks to intensely concentrate on improving the customer experience from a retailer's perspective. He stated that the solution to their issues isn't in data analytics but by focusing directly on the in-store experience.
Starbucks, with more than 17,000 locations across the U.S., recently reported its first quarterly revenue decline since 2020. Sales in North America dropped by 3% in the second quarter of this year, as noted in the company's financial statements.
Company leaders attribute this downturn to the emergence of more cautious spending habits among consumers. With ongoing inflation affecting the economy, people are becoming increasingly selective about spending their money.
According to the National Bureau of Economic Analysis, corporate profits are currently taking up the largest portion of national income in over a decade. Meanwhile, a report from Yahoo! Finance indicates that most Americans are now financially worse off than before the pandemic began.
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Jacqueline Phillips, a New Yorker who visited Starbucks daily, shared her perspective with the U.S. Sun, illustrating the shift in consumer behavior. "With prices on the rise, Starbucks has shifted from being an everyday stop to an occasional treat," she said.
Phillips now opts for a more affordable alternative, making her lattes at a local 7'11 for $2 instead of paying $6 at Starbucks. "It doesn't taste as good, but it's good enough for what I can afford," she added.
Additionally, Phillips expressed her dissatisfaction with recent changes to the Starbucks rewards program, which now requires customers to earn twice as many points to get a free coffee. This modification has further discouraged her from frequenting the chain.
Labor Issues Impact Starbucks Patronage
Ethical concerns drive customers away from Starbucks, not just high prices or rewards points. Morgan Bissett-Tessier, a 31-year-old law student in New York, feels disillusioned due to the company's reported mistreatment of employees and union-busting activities. "It used to be a treat, but now it doesn't seem worth it," she explained to CBS Money Watch.
In a significant legal finding, the National Labor Relations Board last year determined Starbucks violated labor laws over 270 times during unionization efforts in Buffalo, New York. Clara Wheatley-Schaller from Workers United described Starbucks as one of the worst labor law violators in modern U.S. history.
Former CEO Howard Schultz remains hopeful about Starbucks' recovery, emphasizing the need for senior leadership to engage more with frontline staff and improve the mobile ordering system to make it more customer-friendly.
Despite Schultz's optimism and corporate assurances of addressing these issues, activists like Diane Cantave from Long Island Jobs for Justice are skeptical. She argues that better worker treatment and a clean slate from harmful labor practices are crucial for regaining customer trust and support.
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