Starbucks Heads Back to the High End -- With Beer and Movies?

Snobbishness works for some companies -- customers are attracted by that air of exclusivity, high-touch, customized service, and a place with a language that only the regulars know.

Starbucks had a corner on the high-end coffee market, then lost it. McDonald's and other fast food emporiums are turning out passable and cheap versions of the Seattle brewer's most popular offerings and also turn on free WiFi. Meanwhile Starbucks has moved downmarket to take on the fast fooders with sandwiches. It all makes Starbucks seem, well, less unique.

Harvard Business School marketing professor John Quelch tells Reuters:

"The Starbucks brand has shifted over time from being a specialty brand to being more of a mass brand. There is a gap at the top of the market."

That's why the company, looking to revitalize under returned CEO Howard Schultz, is experimenting with two test stores in Seattle that would again offer customers a unique, high-end experience. According to Starbucks Goes Upmarket with Seattle Test Cafe, by Reuters, the chain is introducing:

New look and feel. The stores, based on an Italian cafe model, are outfitted in eco-chic with metalwork and industrial fixtures made by local artisans, over-stuffed seating and counters made of reclaimed wood.
New menu. Coffee is not enough, anymore. The test outlets also sell beer and wine.
New Name. Forget Starbucks. These stores are named Roy Street Coffee & Tea and 15th Street Coffee & Tea.
Movies and Music, Too. Roy Street shows indie films, mostly shorts, and both locations serves up local bands and DJs with your espresso.

Starbucks says some of the innovations pioneered at these locations are already making it into its other stores, although beer and wine may never spread beyond Seattle.

What think you? Is Starbucks headed in the right direction to reclaim its high-end customers? Any ideas for them?

(Roy Street Tea & Coffee image by Starbucks)

Sean Silverthorne

Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.

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