Starbucks closing 600 stores in the U.S.

July 1, 2008 7:06:11 PM PDT
The company that has people lining up for a $5 cup of coffee with extras is now cutting way back. Starbucks Corporation is getting the jitters about the economy and is shutting down hundreds of stores.

Starbucks will be closing 600 stores in the U.S. out of 15,000. There are two ways of looking at it: first it would be to look at it as an economic story about one company. But there is a broader view, as this is a reflection of the economy in general.

"You know I think in some ways coffee is a little bit of a metaphor for the way people feel about the economy, because the coffee is the luxury that everybody can afford. So, it shows up how people feel about spending, and they impractical. They don't want to have these luxuries right now, they can't afford to have those luxuries," said consumer psychologist Kit Yarrow, Ph.D.

It is not the end of the world, but by closing 600 stores Starbucks will eliminate 12,000 full and part-time jobs, and pay $8 million in severance.

This, from the company that came to symbolize good times, whose name had almost replace a product itself: Coffee.

Starbucks had already experienced some growing pains this year. They closed every store simultaneously to retrain employees in an effort to re-capture the old Starbucks experience.

The company has not said which stores it will close now, but most of them are new, and it describes them as stores that were not profitable or not profitable enough.

"Like when I was working in the Financial District, they had three in one block. There's got to be some economy there in just having one store, and if people like Starbucks, they'll go to that store and they don't need three in one block," said Starbucks customer Tom Cupid.

He is not kidding about that either. There are 32 Starbucks within one square mile in downtown San Francisco.


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