Starbucks Appreciates Customer Calls, But Not Enough To Solve Their Problems

After my recent experience with Starbucks' online feedback service over the weekend when its customer service line was down, I called today to find out what Starbucks would do to solve my problem.

They reviewed the notes from the previous call, listened to my explanation of how ridiculous their feedback system was and how worthless their "solution" to my concern was. The response? They appreciated my call to let them know.

Not that they felt like lifting a finger to look into the problem, much less solve it. They could – had they desired – contacted the manager of the store in question, found out who was on duty when my card was rung, and ascertained the facts behind the problem transaction. They could have learned something about how to prevent it, not simply recorded an incident of failure. They might have learned about the peculiar conversation between the school teacher who didn't like Where The Wild Things Are and the barrista, and about how Maurice Sendak thought children afraid of his monsters didn't need to see a watered-down version of the movie but could stay home and wet themselves, and while they were learning about the day in question they might have found out that I was really there and there really was a transaction that got messed up and they really needed to do something to fix it, at least in the future.

Because Starbucks didn't get me to answer a survey before I hung up, they've obtained only good feedback from me to date in their customer survey system. This kind of bias – where unhappy customers driven off the line by obviously insincere saccharine niceties never last long enough to provide a survey result, and only happy customers interested in rewarding apparently adequate customer service stay on the line by way of appreciation – likely pervades all Starbucks' feedback systems, and assures management (in error) that everything is copacetic out on the front lines.

Check out the five-year chart comparing Starbucks to McDonalds:


Starbucks' hold line contained information about a coffee grinder recall. If Starbucks' effort to make money in coffee has really degenerated to the point of trying to increase profit by helping them make coffee at home – and their apparently sluggish (the salesman laughed as he tried to sell it to me) effort to sell customers "via" instant coffee confirms that this is the case – SBUX is really headed toward a sad life as a commodity vendor selling stuff people can get anywhere, including more convenient places and places that will sell for less.

Starbucks certainly won't be differentiated by its customer service.

Starbucks Is Bad At Math

On 2/15, a the Starbucks on Montrose in Houston, I bought a drink for $3.84 using the card 6046 0431 9760 6044. Then, my friend arrived.

The guy who sold me my drink told me, when I tried to buy my friend's identical drink, that the card had been "killed" -- that I needed to pay more for the drink than was on the card. So I handed him a $20 bill and told him to put the change on the card. Because there was some money charged on the card before I handed him the $20, the change should have been MORE than $16.16. I was not given any change except the card, and I didn't get the receipt (the clerks were talking with a customer and I didn't want to interrupt; I assumed the card had been charged as instructed).
The next day I tried to buy a drink at the Starbucks at the intersection of Buffalo and Westpark. I was told that the card was empty. EMPTY! It had to have over $16.16!

When I called about this, the friendly and understanding customer service assistant said she'd sort it out by sending me some coupons. Coupons aren't cash, so I can't spend them where I want if I grow dissatisfied, and they won't qualify me for rewards so they're not the same as having my card reloaded, but enough coupons could put me in an acceptable position. It sounded fine. In fact, I felt sufficiently appreciative of her effort to solve my problem that I spent extra time answering a little survey to make sure her supervisors understood she'd taken care to understand and offer a plausible solution to my problem getting shortchanged while reloading a card.
But today, I opened the envelope with the coupons. I was baffled. Knowing that I was buying drinks that cost $3.84, the customer service associate – who knew I'd been shorted change from a $20 – sent two (2) drink coupons. Unless I'm buying $10 drinks, this is the worst math I've seen in ages.

With math like this at the home office, or with customer service like this to make sure regular customers get as irritated as possible, one fears for Starbucks.

I'll watch carefully to see how Starbucks sorts this out. I can always buy people a drink someplace else.
UPDATE: Starbucks also can't code a feedback page that works, either. The evidence is that "submit" doesn't work when, in a text window claiming to accept 2600 characters, it refuses to submit the form when there are 2217 characters remaining:


UPDATE II: Starbucks' page for submitting ideas is broken, too. Clicking to submit an idea (like "Starbucks could buy a calculator") yields an instruction to sign in. However, there is no sign-in window even after you click to sign in. Nice, eh? So I fished around to send the webmaster feedback on the broken card-reloading-page feedback form. The result was amusing for a page dedicated to receiving feedback on technical issues on Starbucks.com:


Given these execution issues, I'd wonder about Starbucks as an investment thesis even if the company didn't appear besieged by high-volume commodity vendor competitors.

SBUX Performing Per Prediction

Profit tumbling, Starbucks is slashing jobs.  As previously described, SBUX is in fierce competition with large, highly-capable competitors who have effectively made a commodity of the high-end coffee products from which Starbucks had been deriving fat profits.  The impact of the current economic situation is but salt on SBUX' open wounds.  

I continue to call SBUX bear bait.

Sad Joe

This morning when L had the tube on, I saw a group of women interviewed on how they rearranged their lives to save money in these troubled times without actually suffering. One said that if eating out was too much a thing to sacrifice, one could still give up Starbucks. She said it by name. Starbucks. Everyone nodded. The same interviewee talked about becoming conscious of "little things" like ducking into stores to get a $3 bottle of water, to the same nods.

I'm sorry, if someone tried to part $3 from me over a bottle of water I would react as if mugged. I can't quite wrap my head around not noticing an expense like that. To avoid this kind of gutting, I've spent hundreds on a water filter system in my kitchen (now apparently obsolete, and filters will get hard to find; it's time to move!) that takes everything including radon out of the water for a per-gallon cost of a dime. I've had the system for about ten years, and change the filter every 750 gallons. It even purifies my refrigerator's icemaker water, so my ice cubes are free of bad tastes.

But back to Starbucks. Poor Starbucks, synonymous with overpriced pick-me-ups, previously described here in the most bearish terms I could politely muster, is closing stores. What's surprising, folks seem happy about it.

Singing a Sad Song at Starbucks

It was entertaining to see Starbucks state the switch to 2% milk was for the benefit of the public health, like it wasn't starting to feel such pain that it became interested in pocketing 8¢ per gallon over 300 million gallons per year.

Maybe the coup de gras was McDonalds (MCD) being rated by Consumer Reports to have better coffee -- "without flaws" compared to "burned".

Having expanded into music to try to capture spare change from its flow of customers, Starbucks now apparently admits it can't do non-coffee products competitively. Or, at least -- it can't do music. So long, sucka.

The remaining question is: with financially significant competitors like McDonalds entering the gourmet coffee business and offering bistro-style or café-like atmosphere in new-format stores (links here and here), will Starbucks still be able to charge a premium for the same beans McDonalds can process into final products with better consistency and effect?

I'm bearish on Starbucks (SBUX) as a result, but I've not gone short. Betting against crazy people puts you at war with the world, and it's a hard place to be.