Are Stealth Starbucks locations misleading customers?

Discussion
Jan 21, 2015

If you feel good about supporting small local businesses every time you buy your coffee in the morning, you might want to research who really runs your local mom-and-pop. You might be buying Starbucks, whether you like it or not.

Paranoid as it may sound, outlets that have come to be known as "Stealth Starbucks" locations are a real phenomenon, according to a recent article in CityMetric. These are coffee shops that have the varied look and feel of indie stores with no green aprons or Starbucks logos to be found within, but are nonetheless owned and operated by Starbucks. Beginning in 2009 with an outlet called 15th Avenue Coffee and Tea in Seattle, the company has occasionally opened these undercover operations in major markets.

In fact, the coffee shop on the second floor of the Herald Square Macy’s Flagship store is a Stealth Starbucks. Reporting at the time the location got its liquor license, Grubstreet revealed that the application was made under the subsidiary name, Coffee House Holdings, Inc, which Starbucks uses for its stealth locations.

Some speculate that there are more stealth locations out there than one might imagine.

According to the CityMetric article, Starbucks CEO Howard Schultz maintains that the Starbucks locations are not meant to fool an indie crowd into patronizing his company.

CityMetric quotes Mr. Schultz from a 2010 interview with Marketing Magazine in which he said of the first wave of stealth operations, "It wasn’t so much that we were trying to hide the brand … [We were] trying to do things in those stores that we did not feel were appropriate for Starbucks."

That the Starbucks Evenings format now sells alcohol may be evidence that the company uses stealth locations to field-test new ideas and fold the successful ones into Starbucks proper.

Stealth Starbucks outlets are certainly not the only case of corporate entities slyly selling themselves under independent (perhaps more "ethical"-looking) banners. Acquisitions over the last decade have led to a slew of brands that were once manufactured by independent companies, such as Burt’s Bees, Odwalla and Naked Juice, now being produced by giant corporations. Many beer purists are caught off guard finding out Goose Island is owned by Budwesier and Blue Moon by Coors.

Could you see other retail chains using “stealth store” tactics and, if so, for what purposes? Do you find such concepts duplicitous to consumers?

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14 Comments on "Are Stealth Starbucks locations misleading customers?"


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Ryan Mathews
Guest
7 years 6 months ago

Of course! You gain all the economies of scale while being able to appeal to a different—and perhaps hostile to your brand—customer base. The stealth locations also allow companies like Starbucks to test things that might be “off-brand” and/or to more easily bury failures.

As to the second question, yes, and there may be considerable blow-back as customers learn that “The Man” has been trying to fool them.

Bob Phibbs
Guest
7 years 6 months ago

Having made my name early-on against Starbucks and having succeeded, I think the tide has turned and it matters less to customers.

They still want convenience and a great cup of coffee. The so-called “third wave” of former Starbucks baristas is still valid but the “stealth” nature is more that they don’t want to confuse their locations which only serve coffee with some of their experiments.

As a former scrapper against their ways of opening next to successful coffee operators, I have to tip my hat to their focus and determination to succeed. Unlike Target and many others out there, they know and understand their brand very well and rarely if ever make a misstep.

Ian Percy
Guest
7 years 6 months ago

Correct me if I’m wrong, but isn’t this pretty well parallel to private labeling? I’ve come to the conclusion there’s only about three companies on the planet who make everything and they’re thinking of merging. Look, it’s all stealth marketing.

Gajendra Ratnavel
Guest
7 years 6 months ago

Why is Starbucks’ expansion being slammed as some sneaky way for them to make more profit? The new stores don’t align with their brand so they don’t use the branding.

No it’s not sneaky and it’s not hurting the consumer. Just because a retail location is not owned by a big company, doesn’t mean they are aligned with your beliefs. Consumers should be doing the research and deciding for themselves if the coffee shop is operated in a way they like.

This happens all across the map. Cosmetics, drinks, pharma …

Steve Montgomery
Guest
7 years 6 months ago

Interesting terminology using stealth to describe what Starbucks is doing. As is pointed out in the article many of the beers thought to be produced by an independent brewer are owned by large beer companies. Using multiple brands allows companies to try new things without impacting the public’s perception of their brand.

I don’t think it’s deceptive, just marketing.

Gene Detroyer
Guest
7 years 6 months ago

Not duplicitous at all. In fact, fascinating.

Lee Peterson
Guest
7 years 6 months ago

It’s not misleading, it’s a great idea! All brands have baggage, and some of that baggage is not good to certain segments. So why not go after those segments in a different way? Why just ignore them or accept poor results? It’s brilliant actually.

Hello McDonald’s? Starbucks just gave you a good idea.

Camille P. Schuster, Ph.D.
Guest
7 years 6 months ago

Products often have more than one line with each one having a different name. Some retailers have also created different versions to serve different groups of consumers (e.g., Williams Sonoma, West Elm). Do people know or care who owns West Elm? If the new brands being acquired are actually offering different products or services to appeal to different consumers, is that any issue? Some craft beers, owned by companies such as Budweiser, have been successful. Often consumers are surprised to find out who owns a company, but if they like the product and service they are OK with it.

Li McClelland
Guest
Li McClelland
7 years 6 months ago

For dedicated coffee drinkers the appeal is the coffee’s taste and buzz, and also largely about location (i.e., being able to immediately and easily get some when you need it)—the logo is secondary to those two things.

Gordon Arnold
Guest
7 years 6 months ago

There are many consumers out there that have no desire to learn the Starbucks coffee language to purchase their morning mocha choke-ah. And then there is the customer that is “never going there again” for a mountain-high list of reasons; well they need a cuppa too. Relabeling works for many reasons and if some of them can make a profit, well why not?

Mohamed Amer
Guest
Mohamed Amer
7 years 6 months ago

This is a great way to experiment beyond the limits of the existing brand image. I don’t see it as a purposeful attempt to fool the public, but one where creative concepts are tested and potentially plow back some the learnings.

It’s difficult to create test beds in existing formats without the consumers reacting to the brand baggage (good or bad) rather than the concept itself.

Ed Dunn
Guest
7 years 6 months ago

It is cheaper to open up a “stealth store” in Poland, Ireland, Brazil, S. Korea and China which has been the practice for nearly 10 years now. It appears Starbucks wanted to test domestically for a reason.

Shep Hyken
Guest
7 years 6 months ago

Not sure why these are called “stealth store” tactics. There are times when a store must cater to the community and sell items and do promotions that are different from their typical brand. That may mean a change of colors and messaging as well.

Example, Zappos has another brand that sells shoes at a discount. The look, feel and pricing strategy is totally different than their main brand. Many people don’t even know they are associated. Nobody seems to criticize them for that.

If the store is actually trying to deceive the public, it won’t be long before they are caught. I doubt very much that is what Starbucks—or any retailer—wants to deal with.

Brian Numainville
Guest
7 years 6 months ago

Yes, other stores could absolutely use this to test concepts and ideas outside of their current brand to see how they work. This way the current brand doesn’t “get in the way” of assessing a new idea.

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