I thought this was interesting to hear from Schultz, and I think he's entirely right: (
http://seekingalpha.com/article/1964831-starbucks-ceo-discusses-f1q-2014-results-earnings-call-transcript?page=2)
"Holiday 2013 was the first in which many traditional bricks and mortar retailers experienced in-store foot traffic give way to online shopping in a major way. Customers research, compare prices and then bought the brands and items they wanted online, frequently using a mobile device to do so. This was also the first holiday in which consumers embraced the convenience and flexibility afforded by physical and digital gift cards with the passion. Instead of gifting a particular item, many consumers instead choose to give the gift of choice. Starbucks was prepared for both of these shifts having invested over many years in the creation and development of proprietary world class digital and mobile payment and card technology and expertise. This expertise and the assets that support it enabled us to seamlessly process more than 40 million new Starbucks card activation valued at over $610 million in the U.S. and Canada alone in Q1, including over 2 million new Starbucks card activations per day in the days immediately leading up to Christmas and $1.4 billion of Starbucks card loads globally.
Each of these figures represented a significant increase over both last year and candidly our most optimistic projections for this year making Starbucks one of the very few small handful of retailers to benefit from the transfers of reward [ph] store sales to online sales and the gifting of choice."
"A few final thoughts before I hand the call over to Troy. I think this part of my remarks are very important.
Over the last month or so, I have heard many traditional brick and mortar retailers attribute the downturn in their core business during holiday. The factors such as a shortened holiday shopping season, a weakened consumer, the U.S. government shutdown and [indiscernible] but secondly, those explanations ignore a larger fundamental truth. That truth is that traditional brick and mortar retailing is an inflection point. No longer are many retailers only required to compete with stores on the other side of the street. 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.But I firmly believe and I admit Starbucks solid 4% increase in traffic in Q1 validates that we will be among the small group of retailers to gain from the macro transfers of brick and mortar retail sales to online sales underpinning this belief are free dynamic unique Starbucks it manages.
First, Starbucks offers an experience that cannot be replicated or copy. The power of our brand, our heritage in coffee, beverage innovation, customization and the deep emotional connection we have with our customers rooted in longstanding trust and respect that our 200,000 Starbucks partner share with our customers provides us with an overwhelming competitive advantage, not only domestically but around the world.
Second, we invested and continue to invest well ahead of the curve and today have world-leading proprietary digital, social, mobile payment and card technologies and assets. These assets are enabling us to broaden and deepen our connection to customers, enhance overall Starbucks customer experience and further differentiating distance ourselves from competitors.
And we have a full pipeline of new technological innovations introducing in the quarters ahead that will fully leverage these assets and provide us with even greater benefits into the future. And we are just beginning to appreciate the full magnitude and possibilities of the Starbucks mobile payment platform opportunity. And third as our strong traffic in Q1 demonstrates the deep sense of community and human connection that our stores provide our customers as their preferred place. It is only going to become more reformed and more relevant around the world in the future.
Let me say in closing, I could not be more confident that Starbucks unique combination of physical and digital assets makes us
one of the very few consumer brands with a national and global footprint to be in a position to build market share and benefit from the seismic retail and consumer shifts underway."
Comments
http://blogs.marketwatch.com/thetell/2014/01/24/starbucks-ceo-howard-schultz-sets-his-sights-on-vanishing-shoppers/
Schultz's books are also recommended reading. Another very good interview with him on CNBC this am.
apples-next-china-move-an-official-store-on-alibabas-tmall
KWEB might be a good way to get exposure to the digital side of China demand.
Generally agree.
Although perhaps the comparison with B&M merchandise-first stores a little unfair, no?
Isn't Starbucks a restaurant first and merchandiser second? Most people love to eat out.
Online restaurants, a bit harder to do. Certainly see opportunity for restaurants to improve to-go food orders via the web. Online groceries have never been a hit.
I was in SF a couple days ago. Saw the same-day delivery mini-trucks you mentioned recently for Google (or Yahoo or Amazon?).
Yes, generally agree. Adapt or die...
Like in Au Bonheur des Dames, written in 1883 by Émile Zola. As true today, but now Amazon is Le Bon Marché.
That said, I agree with Schultz that retail as a whole is at a very significant point in time, with the combination of increasing mobile/online shopping and changes in payment/shopping experience, which I touched on it a Bitcoin thread today. Yes, it's a little less significant in terms of restaurants, but it becomes whether you're a restaurant chain or a retail store, are you evolving? Even if you're a restaurant, do you have the kind of digital payments system (like SBUX, which has its reward system and payment system under one app) and online interactivity that Starbucks has? (and apparently, they are going to have express ordering by phone soon.)
Does Starbucks start moving out of malls (how many Starbucks are in strip malls where other stores may be going out?) and focus on new stores in other spaces - airports, etc? Starbucks may be a difficult comparison when discussing all of this in some regards, but if Schultz has these views on where retail is going, where is Starbucks going to focus when it comes to new stores and where its offline presence is in general going forward?
Amazon has launched Amazon Fresh - so now you can get your groceries (in certain cities) along with your phone charger or whatever else you order.
Amazon I think is concerning in a way that I don't feel that they are particularly transparent - spending enormous sums of money on infrastructure, barely making money (I mean, what is the P/E now, like 1,500?), tiny margins. It's that fine line of if they succeed in all of the things they are doing, they become dominant in a way that really starts to noticeably overshadow Wal-Mart, which has been playing catch-up furiously in terms of online. If something goes wrong with Amazon's grand plan, things become interesting really quickly. Amazon is making enormous bets and if they pay off, Amazon is king and really kind of advances all of this discussion about where retail is going.
One of the few REIT sectors kinda working (in comparison to the rest of the sector) lately: warehouse space. For the Amazons of the world and the continued growth of online shopping.
http://seekingalpha.com/news/1520171-warehouse-space-the-hot-reit-sector
Apple stores highest gross/SF in USA!!
1. Apple
> Sales per sq. ft.: $6,050
2. Tiffany & Co.
> Sales per sq. ft.: $3,017
http://www.usatoday.com/story/money/business/2012/11/18/most-successful-retail-stores/1710571/
I think that is going to be a big thing going forward - stores getting rid of traditional cashiers (and then can use that register space for other things) and having people be able to ring people up anywhere on the sales floor. I do think point-of-sale systems are going to be going through an upgrade cycle and while I don't have any investments in that at the moment, Ingenico (INGIY), Verifone (PAY) and NCR (NCR) are the key players, with Ingenico being the largest pos terminal maker and have a number of handheld pos devices.
Will check-out Amazon Fresh. I think grocery delivery should be a hit. We've tried it a couple times, but at the end of the day, always went back to going to grocery store ourselves.
Don't know how this will fly on the profit side; but they're giving the concept a go.
Regards,
Ted
A good one.....thanks.
I've not consumed anything from Starbuck's .....
Take care,
Catch
Regards,
Ted
http://www.youtube.com/user/dunkindonuts
From Oct 2013 Milw-Chicago corridor.
Amazon.com Inc.'s distribution center planned for Kenosha, and its 1,100 full-time jobs, will carry an impact that resonates well beyond that city, local officials said Monday.
http://media.jrn.com/images/AMAZON08G.jpg
Over 7% of tenant base rent from Amazon
http://www.chambersstreet.com/download/literature/doc_PFS130630.pdf
Mall turns itself into dressing room for online shoppers
Jan 28 2014, 13:52 ET
A Westfield shopping mall in London plans to offer a premium service to consumers that will allow them to try on clothes they purchased online. A bad fit or an unpleasing style can earn a customer a credit back on the spot.
Online shoppers receive a text message when their item has arrived at the mall and is ready to be sampled.
The development looks interesting with the traffic to U.S. malls in a slump. No great surprise, but Amazon (AMZN +1.6%) is supporting the service.
Great video, professor. I concur with Shultz most of the time. He's created a great business and still maintained his connection with reality. I do NOT drink Starbucks coffee. They over roast the beans and the folks that do buy drinks there don't know the difference. That's OK. I get my road coffee cheap (20 oz. for $1.29-1.49) at my local party/newspaper store or gas station. Note that the best thing that has happened in the coffee industry in 50 years has been the insulted large carafes.
He's spot on about B&M stores. Look around. If they have figured it out, they're going to do well and in the process provide an investment opportunity per Peter Lynch 101 (invest in what you know). Those retailers that don't get it, are an opportunity to short.
Here in Lansing, we have a farmers market/grocery store/nursery that sits smack dab between a Meijers Thrift Acres, a Kroger and a Walmart . . . .and they are kicking their butts. They're the poster child for competing against the big box stores. Note that they don't have anything online. They provide a better selection of everything including specialty ethnic food and produce. They have a line of gourmet coffees but give away a free cup of your choice. They have their own line of cheeses, they have a deli area to get carryout weird, they have as good selection of wine and have wine tastings. They have bulk foods prepackaged, and geez, you can grind your own nut butters. They carry as much local Michigan as possible. It was funny but we had a bad ice storm a few weeks back and all of west Lansing was out of power. But not them. Last year they put in a wind turbine to augment their power but they also put in two large generators. duh. Power was out everywhere, and their registers were ringing. They big box stores had emergency generators, but not back up power. Big difference (looking out at rono's 17K Generac.)
And so it goes,
peace,
rono
Some retailers (Costco, WMT, Target, Amazon, although I'm a little skeptical of Target lately, not only due to the widely reported issues, but because of how not well their expansion into Canada has gone - if they can't do Canada right, how are they are going to expand into other parts of the globe - if they ever do?) will gain share. Some mall operators will gain share who are figuring out how to evolve and what the customer wants - I think Tanger Factory Outlets and Simon (who owns Premium Outlets) are going to do well given the value in these high-end discount malls. I've been to some of the Premium Outlets and they are often jammed. Westfeld is trying to figure out how to integrate technology into the shopping experience.
As Rono says, there are definitely going to be local retailers who figure it out and really succeed.
People are looking for value or even what they believe to be value and I think that will be a priority for a long time to come. I mean, go to a Costco during a busy period - it's nuts.
I agree with Schultz (and it's not about whether or not you like Starbucks, I don't really care either way about Starbucks but I respect the business that Schultz has created and think he's one of the best CEOs in the country - that and his books are worth a read) in that retail is at that point where these companies are either going to get it and evolve or not. And, similar to how some companies didn't get mobile and saw how that effected them, there are going to be retailers who don't understand or are unwilling to make the necessary changes and I don't think they're going to rebound in the way that some of the tech companies (HP, for example, although I think they still have real problems - BBY, too) did when they figured out they were being left behind.