What is Starbucks Really Selling?

There's this idea that Starbucks is eating itself, over saturating the market with stores. If you think only in terms of in-store transactions, that might lead to financial decline. That's only if Starbucks is in the business of selling coffee. It might seem counter intuitive but they aren't. They sell something else.

Whenever I discuss this, I continually think of a company who was in the same business as Starbucks and failed. It was my favorite store, and you might not at first think it is related to Starbucks: Border's Books. Border's once had the right idea, but eventually thought they sold books. I used to spend a good chunk of every Saturday in a Border's bookstore. I would sit at a window table and watch the world go by sketching or writing while students from local universities would have their faces in the text books or notes, studying away for their next exam. Others would sit for hours and talk with friends. One December, in a holiday rush to get more people served in their cafe, Border's instituted a 25 minute maximum time to sit at a table. I moved around the corner to the Starbuck's, as did many of the students and other regulars.

Two years later the store was closed. To this day I insist it was because Border's did not sell books: they sold third space. Books and coffee were merely the local currency, the rent on the chair. The value of third space, the place you go when you are not home or at work to just do what you want to do, cannot be underestimated. Howard Schultz is very clear that a trip to the piazzas of Italy made him realize the power of third space, one he made part of the DNA of Starbucks. He went further though: Third space may not just be recreational. Quite early, Starbucks invested in little things most places take for granted now, and back then others thought was crazy. Starbucks always has an abundance of electrical outlets and free wifi. When on the road, I always knew I could sit at a Starbucks and get some work done, which became a habit I have to this day, spending the first three hours of the day at Starbucks writing or coding. It is my most productive time, the time I have no interruptions from coworkers, no meetings to attend -- only me and my coffee. There's no time limit for how long I can sit, and so every weekday I sit there and have my breakfast there.

For many professions that require mobility, like I did for many years, Starbuck's provides a reliable place to have a portable office. When you think that Starbucks does not sell coffee, but instead sells time in a chair with a table, you think differently about Starbucks' expansions. If that guy or gal who rents office space 300 days a year with a Six dollar beverage finds no space to sit and work, they will leave and not buy some space that day. They might go to a competitor, for that space. But they didn't rent that day at Starbucks. In my experience many stores are getting crowded, making it harder to just sit there, or find anywhere to sit.

Starbucks is not making Border's mistake. They could force people out of the store with time limits, but that goes against the whole idea of third space, of being your space. There would be two other options. If supply is low for space and demand is high. Increase the cost of rent -- sell more expensive coffee. The other is to increase the supply of space. Opening more stores then makes sense if you are not selling coffee, only using it and the pastries as rent.

While others might scratch their heads at what Starbucks is up to , that is where I think they are headed. It is in their core beliefs to sell the experience of third space, and they are merely expanding the supply of product.

Steve Lipton is the mind behind makeapppie.com for learning iOS app development. He is the author of several books on iOS programming and development. He is also a LinkedIn Learning and Lynda.com author. His latest courses are Advanced iOS ApplicationDevelopment:Core Motion and Learning Swift Playgrounds Application Development