The death of the American mall is forcing Starbucks to make some major changes
As mall traffic plummets, the future of Starbucks's tea-focused stores is in question.
On Thursday, the coffee giant announced it was "evaluating strategic options" for its struggling Teavana stores located in malls across the US. Currently, the chain has roughly 350 Teavana mall locations.
"Over the last several years many mall based retailers have been adversely impacted by reduced foot traffic, resulting from the accelerating shift of consumer behavior away from brick and mortar retail and changes in consumer retail activity overall," Scott Harlan Maw, Starbucks CFO, said in a call with investors. "Our Teavana mall stores have not been immune with many reporting negative comps and operating losses for some time."
While Starbucks has invested in new store designs and updated merchandising, Maw said that the rate of decline at mall-based Teavana stores over the last six months has been worse than forecast and that the company expects further declines.
The death of the American mall as we know it has impacted Starbucks' strategy in other ways as well.
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"Over the long term, you have to ask yourself a bigger question," Howard Schultz, Starbucks' chairman and former CEO, said Thursday. "That is, given the seismic change in consumer behavior and how disruptive online shopping and mobile shopping has been to traditional bricks-and-mortar businesses and companies, who's going to survive and who's going to win?"
Schultz believes that for Starbucks to survive, it needs to be digitally savvy and a destination that draws customers.
"Every retailer that is going to win in this new environment must become an experiential destination," he said. "Your products and services for the most part cannot be available online and cannot be available on Amazon."
To become a retail destination, Starbucks is investing in super-sized, upscale Roasteries. On Wednesday, the company announced it would open its sixth Roastery in Chicago in 2019.
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