Howard Schultz, the Chairman, and CEO of Starbucks is stepping down from his role as CEO. He is doing so for the following two reasons: first, he wants to lead the development of a new offering, and second, he wants to do more with Starbucks’ social responsibility programs.
Pulled Apart at the Seams
What is this new offering? It’s a $12.00 cup of coffee. The coffee is going to be brewed from spectacularly rare beans and in very small batches. This $12.00 cup of coffee is also going to be brewed differently, like some kind of fusion brew, or something.
At the very same time that this story is making news, it is also being reported that Amazon.com was responsible for 31 percent of all Thanksgiving weekend spending online. If you are a retailer, you felt a sharp pain in your heart. Bezos is the alpha predator, the Great White shark, and he is chomping up everything in sight.
What does this mean for you and me? Here is my take. Markets are being torn in two. Literally.
Things that can be made more transactional are being pulled sharply in that direction. Amazon.com believes that retailers don’t add a lot of value to most purchases and that people prefer the convenience of buying what they want and having it delivered straight to their doorstep (in some cases, the same day).
Who is suffering because of Amazon’s ascendance? Walmart. The problem with a transactional model now is that technology can enable competitors to be even more transactional.
Don’t lose hope here; stay wth me. For every action, there is an equal and opposite reaction.
Where greater value can be created, things are being sharply pulled in that direction. I pay $2.35 for a large cup of Starbucks coffee. I have paid for their special reserve coffees. Coffee is one of my very favorite things on Earth, and I believe that it is worth paying more for that experience. Many of you will read this newsletter on an Apple device, one that had a higher price than the alternatives available to you.
There is a market for people who will pay for something much better than average. There are people who want to pay more for something exceptional. The people willing to pay more in one area may choose to transact in other areas.
This is important because most of us aren’t going to benefit by trying to be more transactional. If you think it is difficult to win clients with a higher price, try winning clients when you are not different than your competitors. More still, trying running a business with razor thin margins. Being exceptional in some way that is meaningful to the clients you serve is a better–and safer–long term strategy.
What makes you worth paying more to obtain?
Which way are you being pulled, and what does that mean for your future?