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Does a co-working concept make sense for Starbucks’ business?
Starbucks was a pioneer in establishing itself as a place that remote employees visit to set up shop and spend the day working. Now, the coffee chain is opening a store concept in Japan that is even more geared towards the work-from-home set with a whole floor’s worth of work-related amenities, making it as much a co-working space as a coffee shop.
The top floor of the Starbucks in Tokyo’s Ginza neighborhood features private video conferencing booths, semi-private booths available for customers to book in 40-minute increments, tables bookable for small group discussions and a solo workspace called the ThinkLab that can be reserved in 15-minute intervals via an app, according to a Fast Company article. The bottom floor of the location operates as a standard Starbucks. The company does not currently have plans to expand the model elsewhere in Japan or into the U.S.
There may, however, be a need for a new kind of working space in the U.S. The nation continues to struggle with the novel coronavirus pandemic (making shared indoor workspaces potentially dangerous), leading to the rapid expansion of the number of people working from home. This could mean an eventual post-pandemic demand for more business-focused spaces in coffee shops and other places frequented by work-from-homers.
Before the novel coronavirus pandemic, co-working spaces were appearing nationwide to meet the needs of an already growing remote workforce, consisting of both employees working from home and startups with little or no traditional office space.
Chains such as Office Depot and Staples had begun to get in on the act with new concepts that moved away from traditional office supply stores and into spaces where entrepreneurial customers could come to collaborate and utilize technology services.
The biggest story of the early co-working boom, though, was WeWork. The rise and fall of the chain of subscription-based co-working spaces called into question the viability of the model. The company’s 2019 attempt to go public led to investor scrutiny of its business fundamentals, resulting in the failure of its initial public offering, the stepping down of its CEO and massive staff layoffs, Business Insider reports.
- Private phone booths and coffee aplenty: This new Starbucks looks an awful lot like WeWork – Fast Company
- Will Staples’ new concept connect with small business owners? – RetailWire
- Will AT&T give Starbucks competition as the new ‘third place’ for people to hang out? – RetailWire
- The WeWork fiasco of 2019, explained in 30 seconds – Business Insider
Discussion Questions
DISCUSSION QUESTIONS: Do you see a business opportunity for Starbucks to develop co-working spaces as part of its U.S. coffee shops? What pricing structure (subscriptions, per hour) and amenities would it need to offer to monetize the co-working opportunity here?
Poll
BrainTrust
Jeff Weidauer
President, SSR Retail LLC
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
The concept of co-working spaces is more intriguing during the pandemic and in a post-pandemic world as employers are now allowing or encouraging employees to work remotely. The challenge is making co-working environments safe and profitable. Space is a premium, especially in big cities. While I am sure there are many workers that would like a private space outside of their home with less distractions, most won’t be willing to pay for it. Probably the only way to make it a profitable venture is to charge employers for renting space for their employees.
I had not thought of the concept of having employers pay. That is an intriguing idea. The co-working or simply working outside of home but not in an office concept is a good one, but possibly not very lucrative due to the expense of the space. WeWork is a great idea that is still struggling. We are certainly on the right track and I think David’s twist offers for some new thinking. And, my 2 cents.
As you read about big companies selling their big offices because of remote work due to the pandemic, there definitely will need to be options for those that have a need to meet to face to face and this may be a good option for workers. I think they would need to be competitive in pricing structure (coffee would have to be included) and enough parties need to be scheduled consistently in order to make it profitable.
This was a good idea pre-pandemic; now it’s a great idea, never mind the WeWork debacle. As more people work from home, the ability to find another place to meet others or just get a change of scenery will grow in demand. Once the worst of the pandemic is past, many of us will want to get out for a bit. Let’s hope this goes global soon.
A post-COVID-19 world will include a new workforce operating model which will support a remote and hybrid office/remote strategy. As our society has proven that people can be quite productive remotely, when things stabilize Starbucks and other coffee houses could formally become an affordable subscription-based remote office model.
However up to this point, Starbucks cafes have not been built to sustain a full day workday and it’s very much a first come, first served situation. We have seen startups partnering with restaurants in NYC that offer up office space during the off hours. However they are subscription-based, supervised, and have set up the necessary infrastructure and security so people have a safe and secure place to work.
For this to be a successful venture for Starbucks, they will need to make significant investments in technology, capabilities, human capital, and re-architecting their cafes to support this strategy.
One thing to remember is that most remote workers are accustomed to working from their homes and probably have a dedicated space to work which they are comfortable in plus feel safe in. If Starbucks decides to develop co-working spaces in the U.S, the biggest challenge would be ensure social distancing and safety measures to give people the confidence to spend a couple of hours in an enclosed space which is not home. They should start with a per hour model to see how people respond and probably move to a subscription model once the pandemic ends.
Starbucks seems to be betting that, instead of being the “third place” (with offices shuttered) it might be the “second place.” If customers feel it is safe to use, Starbucks may really be on to something.
Starbucks’ original positioning as a place where you could access reasonably fast Wi-Fi worked in no small part because the only cost for it was the price of a cup of coffee. I foresee a great deal of difficulty in moving from a no-cost space whose stated goal was to sell coffee to one which is basically pay-by-the-hour office space. There might be a market for this concept, but I expect the market for this concept to be small.
Co-working spaces have a new cachet both during and post-pandemic. It’s conceivable that WeWork and those like them could see a resurgence as office space takes on a new meaning for so many employees who are currently working from home. Starbucks already had a “third-place” aura about it and this may be a wise move for Starbucks to explore. It may not work everywhere Starbucks is found today, but I can see this becoming yet another format for their locations that we’ll see expand over time.
When we travel we have often used rental spaces like this and have looked into them locally as well. I can tell you that they aren’t cheap. This is a smart idea, especially since people already haunt tables at Starbucks. The company might as well make more for that space than the price of two cups of coffee.
Even if you work from home and have a beautiful office setup, it’s still nice to get out and meet with colleagues in a place where you aren’t surrounded by people there for leisure purposes. I have often visited the cafe at the Starbucks Roastery on Chicago’s Michigan Avenue and thought it would be a cool place to work. Maybe someday I will be able to do that.
I have no doubt that co-working spaces will become the new “office visit” for the larger group of people who adopt remote work as a permanent feature. The question is, when will it be safe to get out of the house and spend time indoors in a public place? I’m guessing the second half of 2021. I also expect that there will be a lot of repurposing of space, maybe even former retail/restaurant street front space to this concept. There was some of this going on here in Portland last year, but as you can imagine it’s all paused for the moment.
Given the human density In Tokyo’s Ginza neighborhood, a Starbucks co-working space makes sense. Back in cities and towns across the U.S. why pay to drink coffee at Starbucks? That being said, in many cities across the country small coffee shops have lost their business due to COVID-19, so there are fewer free places to meet colleagues. It will take some time for people to leave the safety of their homes for face to face meetings at a co-working space. In the meantime, investing in real estate to start a Starbucks co-working business seems very risky. Not to mention all the other startup costs including staffing. This then leads us to the hurdle of training customers to rent a table at Starbucks. I don’t see it working at scale.
I don’t follow the logic here. If it’s still so dangerous (at work) that people still have to work from home, then wouldn’t it be even more dangerous in the shared space of a Starbucks? I don’t doubt SB will try this out, and it will probably find some success — how much I don’t know — but it faces headwinds as well: Starbucks (and other such open plan coffeeshops) have developed a reputation as places where you get your laptop stolen … so better security would seem to be the top “amenity” they need to consider.
This is a natural for SBX, as long as they don’t make the WeWork mistake.
Shared working spaces have been successful for decades. What made them successful was that the operator understood the client, local offices for national and international companies, offices for small companies and offices for financed start-ups.
WeWork never understood the client. They thought every small independent individual would be interested in what they had. They provided too many amenities, charged too much and overbuilt. The client they were wishing for never materialized to the scale they forecasted. WeWork was in trouble long before we read it in the press.
SBX is already part of the way there. At my local SBX (pre-COVID) there were 4 or 5 independent business guys spending the day there and multiple more spending hours. Take it one step further, give access to a few necessary amenities. Make it available at an ad hoc basis to be used occasionally or regularly.
This is the perfect domino strategy.
It’s already happening. The coffee shops in the suburbs are packed with folks on their laptops and phones and the Starbucks locations near business centers are pre and post meeting hubs. This is happening not only domestically, but abroad as well.
If Starbucks begins to cater to their core customers’ needs at the aforementioned locations, they will profit from it. I’m not alluding to a modified WeWork model, rather a model that fits the current consumer behavior that is not currently monetized.