Starbucks CEO sees ‘seismic shift’ to online shopping
On last week’s conference call for Starbuck’s first-quarter earnings, Howard Schultz, president and CEO, made some waves by claiming brick & mortar retail was at an "inflection point" in losing traffic to e-commerce shopping.
In wrapping up his company’s initial comments, Mr. Schultz said he heard many traditional brick and mortar retailers blame their holiday shortfalls on factors such as the shortened holiday shopping season, a beleaguered consumer and the U.S. government shutdown. But he believes many left out "a larger fundamental truth" around the growing influence of the internet.
"No longer are many retailers only required to compete with stores on the other side of the street," said Mr. Schultz. "They are now required to compete with stores on the other side of the country. Navigating the seismic shift will continue to be very, very difficult for me."
In particular, traffic and comp growth softened in December, which he agreed may be partly due to weather but also because people were spending more time on the web during the traditional "gift giving time"’ than ever before.
Mr. Schultz believes the shift will be skewed toward mall-based retailers and will represent a "real sea change for many, many retailers." It also "will not be a December-ish problem" but an "an ongoing issue and it’s going to hit them faster than people think in terms of the way people are shopping and how they are spending their time, and the value that you can get on the web."
The Starbuck’s chief exec spelled out how the company’s unique experience, loyal following and ongoing digital investments will offset expected ongoing losses in traditional retail traffic.
Mr. Schultz’s comments follow a Jan. 16 Wall Street Journal article entitled, "Stores Confront New World of Reduced Shopper Traffic," that said Best Buy was among those seeing a drop-off in traffic after Thanksgiving with more people shopping online. The article indicated that shoppers aren’t browsing as much in stores but "seem to be figuring out what they want online then making targeted trips to pick it up from retailers that offer the best price."
The article cited ShopperTrak data that showed that holiday traffic in 2013 was about half of the traffic in 2010, and overall shoppers visit an average of three stores per mall trip now, down from five in 2007.
- Starbucks Reports Record Q1 Results and Reaffirms FY14 Growth Targets – Starbucks
- Q1 FY14 Starbucks Earnings Conference Call – Starbucks
- Why Starbucks Worries About Retailers’ Dwindling Foot Traffic – Bloomberg Businessweek
- Stores Confront New World of Reduced Shopper Traffic – The Wall Street Journal (sub. required)
- Retailers See Fourth Consecutive Annual Sales Increase During 2013 Holiday Season, According to ShopperTrak – ShopperTrak
Do you think other top retail executives are finding it difficult “navigating the seismic shift” to online as admitted by Howard Schultz? Does online represent a greater threat or opportunity for Starbucks?