Starbucked Page 11
And it wasn’t just the drinks that Starbucks adapted to the consumer’s desires; the company also designed its stores with the customer’s subconscious in mind. Howard Schultz might claim that Starbucks was “built on the human spirit,” but it was really shaped after the human id.
Phase 3: “Grow, Roast, Brew, Aroma”
In 1994, the management consultant Eric Flamholtz sat in on a high-level meeting at Starbucks headquarters. The question under discussion was straightforward: “How can we become invulnerable?” Executives tossed in a variety of ideas for establishing the company as the planet’s dominant coffee purveyor, but the conversation soon focused on one divisive proposal — that Starbucks should set a goal of opening two thousand stores by the year 2000. To many in the room, the idea seemed preposterous. At the time, Starbucks had only four hundred stores, so it would have to quintuple in size in just five years. Others saw it as a challenge, an achievement that would firmly entrench Starbucks as the industry giant. “It was like Kennedy putting a man on the moon by the end of the decade,” Flamholtz recalled. “It was essentially a statement.” Naturally, Schultz was game. Once the “two thousand by 2000” plan gained approval, many investors started betting that this bit of hubris would sink the company. “When I took the job at Starbucks, I got a call from an institutional investor friend of mine who said, ‘You fool! We’re shorting that stock!’ ” Bedbury told me. “He gave me ten or fifteen reasons it would never work. People thought that after McDonald’s, nobody could expand like that again.”
In a sense, those people were right: if Starbucks had continued down the path it was taking in 1994, it would have gone bankrupt straight away. The company was still designing and constructing each new store from scratch, at enormous expense; the cost of building a store had climbed to an average of $350,000, up from $200,000 a few years before. If he wanted to open sixteen hundred stores in five years without going broke, Schultz had to find a design template that Starbucks could replicate inexpensively, while still providing the warm and cozy “experience” that was the key to satisfying customers’ desires. In essence, Schultz needed a cheap look that didn’t seem cheap. Plus, in contrast to the old “here’s your coffee, now leave” system, the new design had to adhere to the third-place model and encourage people to hang out in the stores. It was a difficult order to fill. Several architects and designers tried and failed.
As it often happens, Starbucks’s eventual savior was an unlikely one. Speaking in his lazy Carolina drawl, Wright Massey sounds nothing like a designer, much less the creative brain behind a fanciful and iconic retail environment. As Conlon put it, “Wright seems like a redneck from the country.” But Massey’s reputation as a commercial artist is so exceptional, I’ve heard at least three Starbucks executives take personal credit for hiring him away from Disney, where he’d been molding that company’s mall-based Disney Stores. And Massey himself isn’t unnecessarily humble about the significance of the design effort he spearheaded, which has since been imitated everywhere from airports to grocery stores to hospitals. “Starbucks wanted to reduce costs, but they didn’t want any two stores to look alike,” he told me. “It’s called ‘mass customization,’ and it’s very tough to do — it hadn’t really been done before. They gave me a million and a half bucks and I did it in one year.”
As Massey tells it, he had to do everything but enter into hand-to-hand combat with Starbucks executives to keep them from screwing up his work. (If he actually did need to fight, he would have been prepared. Massey kept a World War II–era army helmet and a buggy whip in his office; when people asked him why they were there, he would reply, “For days like this.”) During Starbucks’s midnineties expansion, the company had begun hiring former fast-food executives to help manage its growth, and these new hires held very conventional views of what the stores should look like. “The execs wanted stainless steel, not wood,” Massey said with scorn. “They wanted five cash registers and more throughput. They wanted everything dark colored, so you couldn’t see any dirt. People in that company wanted to make the cups Styrofoam! These fast-food execs just didn’t get it — the ritual of it and the feeling. They just wanted stores that were easily maintained and clean.”
So Massey refused to let any of them see his team’s work while it was in progress. Allowing such an unorthodox approach was a huge risk for the company. “This wasn’t like betting just a chicken or a pig, it was betting the farm on Wright’s ideas,” said Conlon. Many among the Starbucks brass thought Massey was insane — literally. Every week, the company sent in a therapist to speak with him, to make sure he didn’t crack. “They thought I was crazy because I wasn’t like them, but I thought they were crazy,” Massey said. To those who didn’t share his brutal honesty and focused work ethic, he could be downright caustic. “He would say just the darnedest things,” recalled Brooke McCurdy, who spent much of her time undoing the damage caused by those darnedest things. “I don’t think he sees the value in the grease between people that makes things run smoothly — the pleasantries. But I think that’s what made him able to get so many things done.”
To properly inaugurate his tenure at Starbucks, Massey decided to organize a communal mocking of his new employer. One day, he sent a group of design and development employees down the street to Home Depot with instructions to buy a variety of things used to build a Starbucks store — switches, faucets, floor tiles, and so on. When they returned with the receipt, Massey eagerly pointed out that the company was paying much more for these materials than his staff just had. “I told them, ‘No wonder you’re losing your ass,’ ” he recalled. Soon, he isolated his employees completely, cloistering them away from the corrupt influence of what he saw as a spendthrift company culture.
Massey claimed a loft space on an unfinished floor at the vast new “Starbucks Support Center” south of downtown Seattle, and for the next few months he held his design group prisoner there. Few visitors were allowed, and most employees didn’t even know the place existed. Inside, an eclectic group of graphic designers, interior decorators, architects, and (for no apparent reason other than their familiarity with “feelings”) poets did artsy things in hopes of arriving at a unique, imaginative look that Starbucks could call its own. They constructed tables out of scrap and old doors; they drew the siren in various attitudes, including “Bad Hair Day Siren”; they painted whimsical images and stream-of-consciousness phrases on walls. This last method yielded one of the company’s most distinctive design elements: the nonsensical yet inspirational wall mural, a medley of swirls, colors, and expressions like “Journey with . . . / relax celebration / mug of steaming reflection / heart meeting under happy stars.” *
This band of artistes wasn’t starting from nothing, however. Over the years, Starbucks had introduced many useful refinements to its layout. For example, some café owners had assumed the espresso machine was a noisy eyesore and removed it from view, but Schultz placed it front and center so the customer could see the barista work her magic — again, pure coffee theater. The notion of letting customers add their own cream and sugar was also new, as was the practice of ordering and picking up drinks in different areas to reduce congestion. Some elements of the store environment were off-limits to the design team, like the sacred white cup. * If Starbucks was to be a soothing haven from the outside world, televisions were likewise out. (Schultz claims a cable executive once handed him a blank check in exchange for the privilege of playing his channel inside Starbucks for a few hours each day, but he handed it right back.) And nothing was allowed to interfere with the all-important coffee scent in the stores. “What is lost on most people is the importance of aromas,” said Ted Lingle, head of the Specialty Coffee Association of America. “I have friends who say that when they walk into a bean store, they know instantly how successful it is based on how it smells.”
Everyone wanted something different from the end design — with Schultz jockeying for a classic Italian look and the fast-food veterans hoping for a bri
ght plastic hell they could hose down at the end of the day — but Massey ultimately delivered a look that closely obeyed the “Big Dig” findings. The soft and fuzzy specter of the “Starbucks Experience” hung over every aesthetic judgment. Colors were subdued, either earth tones or gentle pastels. Whimsical flourishes like waves and swirls of steam abounded. Counters curved around merchandise displays to reach a circular handoff platform, spotlit from above by a handblown glass light fixture. Plastics and glaring metallics missed the cut, in favor of natural materials like warm woods and stone. There was even a rationale for the shape of the tables: they were small and round, ostensibly to preserve the self-esteem of customers drinking alone, since a circular table has no “empty” seats.
The new experience-focused design engaged each of the customer’s senses, from the obvious (sight, taste) to the not-so-obvious, like touch, which the designers managed to connect with through display bins that showed the coffee bean in various roasting stages. Customers could thrust their limbs into the product and feel the same kinesthetic ecstasy Schultz wrote about. In fact, Starbucks poured much of its store bud-get into a “touch zone” from knee- to eye-level, and then skimped everywhere else. (The ceilings, for instance, were often just spray painted a dark shade.) Noses and ears received consideration as well: a heady coffee aroma saturated the air, as did the carefully chosen music, which changed in mood throughout the day to reflect the needs of customers in each “day part.” This music was so well selected, actually, that the company became something of a musical tastemaker, purchasing the Hear Music record label in 1999 and later receiving its own XM Satellite Radio station and dedicated section in the iTunes store. (There were also plenty of sounds Starbucks wanted customers not to hear in its stores, which is why it placed noise-dampening shrouds over the Frappuccino blenders.)
But the key virtue of Massey’s layout, in the eyes of the bottom-line-watching executives, was its cost-effective versatility. In keeping with the hazy mysticism of the new Starbucks image, the design came in four different color schemes, corresponding both to the four elements of antiquity and to the stages of the coffee-preparation process. “Grow” featured earthy greens, “Roast” consisted of fiery reds and coffee browns, “Brew” brought out watery blues and (again) coffee browns, and “Aroma” included airy pastel yellows and greens. The four color templates, mixed with various furniture combinations, allowed for a total of twelve potential designs — enough, apparently, to inspire executives to claim that each Starbucks store was like a unique snowflake. “You’re not going to see any Starbucks that’s like another Starbucks,” claimed one district manager, as though a customer accustomed to the “Brew” palette might wander into a “Roast” store and become so disoriented that he would have to ask a barista if this new and wonderful place was in fact a Starbucks. It was still cookie cutter, of course — there were just a few more shapes.
The rigidity of Massey’s system was in many ways its greatest asset; by forcing Starbucks to pick from a few preselected colors and furnishings, it allowed no way for store costs to exceed a set limit. Massey compiled a playbook containing an image of each individual component used in the stores. The company stockpiled these parts in ware-houses in California and New Jersey, and shipped a set out en masse when a store was about to begin construction. For contractors, it was like receiving a huge model airplane kit: they just had to glue everything together. The whole process happened far more quickly than ever before, with total store development time now cut from twenty-four weeks to eighteen weeks. Costs fell from the $350,000 average down to $290,000, which, when multiplied by just the sixteen hundred new stores Starbucks planned to build by 2000, would result in a whopping $96 million saved.
None of this could happen, though, without first getting the endorsement of Starbucks’s supreme committee of one. Before Schultz visited the designers’ secret lair to inspect their work, the group built full-scale models of each store, complete with furniture and espresso equipment. “When Howard came down there, I was yabbering like a cat on a hot tin roof, trying to explain everything,” Massey recalled. “So Howard said, ‘Wright, if you have to explain it, it doesn’t work. Just let me experience it.’ ” After wandering silently through the environment for a few moments, Schultz turned and said, “Tear this stuff down right now and get it into every store in America.” Recalled Massey, “He never said another word about it — that’s how sure he was.”
The company followed Schultz’s edict with aplomb. To its base of 425 stores at the beginning of 1995, the company added 250 stores that year, then 340 the following year, then 400, then 470, then 600. Starbucks didn’t just hit two thousand by 2000; by the end of that year, it had almost double that, a total of thirty-five hundred coffee-houses. * “It was suddenly very obvious that everyone else was an amateur,” said Don Schoenholt, the specialty-coffee guru. “Everybody else was working with Formica and old wood panels, but Starbucks was going in with professional architects. And whatever it is that they haven’t figured out yet, they’re really good at hiding it.” That was exactly the point. With its consumer-tailored image firmly in place, the company soon set out to erase any blemish on the “Starbucks Experience.”
Phase 4: Refining the Formula
By the late nineties, Starbucks had put so much distance between itself and its competitors that it almost seemed they were in an entirely different business. Chains like Tully’s and Gloria Jean’s were busy staving off bankruptcy, and modest successes like Peet’s and Caribou Coffee were executing cautious growth plans; Starbucks, on the other hand, had snared a huge clientele, claimed turf in every major American city, and developed a powerful brand. All that was left for it to do was to milk every cent it could out of those loyal patrons. “In a rare moment of honesty, I heard one employee say, ‘We’re supposed to try to sell everything to you,’ ” Jim Romenesko, the Starbucks Gossip webmaster, told me. “Starbucks has this incredible ability to squeeze every dollar out of customers.”
The company has excelled at the task by any measure. As of this writing, Starbucks has had fourteen consecutive years with at least 5 percent growth in same-store sales, an astonishing streak for a company that has saturated America with so many stores. Essentially, this means Starbucks has been plunking new cafés across the street from its existing cafés and still increasing sales at the existing cafés. (Just in the past four years, the average Starbucks has boosted its sales from $798,000 to more than $1 million.) The typical Starbucks customer spends $4.05 per visit for coffee, compared to the fast-food industry’s average of $4.34 a person for an entire meal. Schulz has often said, “There’s no secret sauce here. Anyone can do it.” But no. Not just anyone can carry out the microscopic refinements that have turned Starbucks stores into streamlined money machines.
Starbucks already heeded the basic laws of merchandising — like making sure every customer walks past the pastry case before ordering, and placing the highest-margin merchandise just to the right of the register (since most people are right-handed) — so most of these fine-tunings weren’t obvious. “Anything we did, we tried to make it invisible to the customer,” said Paul Davis, a former president of Starbucks North America. Aside from the customer’s need for a third-place experience, Davis explained, patrons really only care about three things: cleanliness, order accuracy, and, above all, speed of service. Lines have always been the company’s top complaint, and Starbucks has gathered a mountain of statistics about the psychology of queueing. According to the “retail anthropologist” Paco Underhill, a Starbucks consultant, people are generally content in line for about ninety seconds. After that, their sense of how long they’ve been standing there begins to distort; those who have waited two minutes feel like they’ve waited three minutes, and so on. It helps to give customers things to look at and to have an employee greet them, but there’s really only one solution: get them through the queue as quickly as possible.
Starbucks fought the menace of slow lines with a system of inventi
ve and effective refinements. (They were so effective, in fact, that Britain’s National Health Service adopted the company’s “interlocking queues” system outright in its hospital clinics.) “Starbucks was renowned for how fast they’d turn a line around,” said George Howell, of Coffee Connection. “They were the model.” Here’s a sign of how far the drink-preparation process has evolved over the years: in the early days, the employee who took a customer’s order would place a cup next to the barista in a specific position to indicate the desired drink. An upside-down cup with the logo facing forward and slightly left, for instance, meant “skim decaf cappuccino.” * Today’s system is simpler (they use felt-tipped pens), and the whole drink-making process is far more efficient. Starbucks’s service target is now three minutes from when the customer walks in to when the beverage is served. (Here, some regular Starbucks customers might protest that this three-minute rule has never applied to their store, crammed as it is each morning with commuters ready to claw each others’ eyes out. The company was actually angling for a three-minute average.)
Back at Starbucks headquarters, store operations specialists work obsessively to cut down the time it takes a barista to make any given drink; they call the coffee business “a game of seconds.” When they discovered that baristas sometimes had to dig into the ice bin twice to get the right amount for a venti Frappuccino, they designed a new “volumetric” scoop that cut fourteen seconds off of the prep time. Unbeknownst to most customers, Starbucks now uses automatic espresso machines that grind, tamp, and pull espresso shots at the push of a button, while steam wands equipped with temperature sensors stop foaming the milk at precisely the desired moment. This strips the luster from the “handcrafted beverage” idea, yet a latte-making process that once took a full minute now takes thirty-six seconds, which allows Starbucks to nearly double the amount of money it can make in that period of time. According to the Wall Street Journal’s secret shoppers, the company makes the fastest latte in the business.