Want to get your spiced latte in your pajamas? You can soon.
Starbucks (SBUX) says it will be delivering coffee to your door in selected markets during the second half of next year. It’s the latest effort by the giant coffee retailer to boost sagging sales.
But Yahoo Finance’s Jeff Macke says this likely won’t be a cash cow for the company.
“It’s not a fantastic business model to go around delivering coffee,” he says. “It’s not a really huge margin product.”
However, Macke credits CEO Howard Schultz with trying to come up with new ways to attract customers as Americans change their shopping habits.
“Howard Schultz has been warning about slowing mall foot traffic for quite a while now,” he notes. “So in terms of delivery, he’s going to go after that market; in terms of apps, software, he’s going after that. He’s basically doing anything you can do as a great merchant in the face of a consumer that’s not spending.”
Macke points to the government’s just-released data showing U.S. consumer spending unexpectedly dropped 0.2% in September.
Starbucks’ announcement comes as it reports quarterly sales that were below analysts’ forecasts. What is worse, the company says sales and profit during the all-important holiday season will come in below previous estimates.
Yahoo Finance Editor in Chief Aaron Task suggests a couple of reasons for what’s behind the company’s recent struggles.
“Maybe we’re all getting ‘frappuccinoed’ out,” he says. “And the reality is you can get a good cup of coffee at a lot of places now, which is why Starbucks is trying other things like soda in the Southwest and food in many more stores.”
And he wonders if the world’s biggest coffee retailer might be straying too far from what made it number one.
“They’re getting away from what made Starbucks great, which is being a place where you can get a good cup of coffee,” he points out. “I give them credit because they have to try to adjust to where the consumer is. But this is a different model from where Starbucks first started.”