Grinding competition

This valley’s urban landscape has been branded with a corporate logo. Many of them, actually, but we’re talking about one in particular here. Within a few years’ time, 30 Starbucks have opened in this valley.

Who knew there were so many opportunities to sell a cup of coffee? Starbucks knew. That’s part of its success. Prior to opening a shop, it scrutinizes the logistics of the location to determine the total retail sales in a two-mile radius, daytime population and traffic flow. Starbucks grew from a single coffee house in 1971 to more than 30,000 locations across the nation today.

What impact has Starbucks had on local coffee retailers?

“Locals have benefited from the trend driven by Starbucks,” Dick Bartholet says. He’s the director of research at Nevada Small Business Development Center. He says Starbucks has changed the perception of coffee and value, along with peoples’ habits.

Starbucks offers a consistent cup of coffee and convenience. This simple approach to the coffee business allows locals many opportunities to find market advantages, but it’s complicated. Starbucks’ corporate logo is a powerful tool for promoting sales. Locally-owned stores must find ways to stand out without such brand recognition.

Dreamer’s Coffee House on the south side of the Virginia Street Bridge has 14 people in the shop at 5:15 p.m. on a Wednesday night. They’re using free wireless Internet, meeting with friends, lounging on couches and chairs. A comfortable atmosphere invites folks to stay awhile. Customers enjoy an art wall that changes every six weeks and prices a bit lower than Starbucks.

“I have felt a small pinch,” says owner Jonathan Bascome. “I personally believe they [Starbucks] have the philosophy that they will dominate the local coffee houses.”

Five years ago, Bascome competed with Starbucks for his location on South Virginia. He says the building owners didn’t want “corporate coffee.” They wanted a local business to complement local artists. Since then, two Starbucks have moved into the neighborhood.

Bascome doesn’t want to lose customers to Starbucks. He’s stressing great customer service and a high quality product to his staff. And, he’s opening up a coffee kiosk in a Sierra Street courthouse annex. “If I put myself inside, then people don’t have to cross the street, making it convenient to get my product,” he says.

At the new Starbucks on First and Sierra—about two blocks from Dreamer’s—three customers enter, order and leave in the span of 15 minutes. Peppy music, familiar throughout the chain, pipes through the speakers. Red plastic barstools line one windowed wall.

Mike Lockwood, 23, loves his job at Starbucks. “It’s a great company to work for. After 90 days, working 20 hours a week, I received full health and dental and 401K.” He’s a music major at UNR. After graduation, he’ll transfer to a Starbucks location in Los Angeles or New York.

Lockwood says Starbucks plans to offer Internet access at a “minimal cost” and outdoor patio seating in the near future. He suspects business will pick up when people move into the new condos above the shop.

At Java Jungle on West First Street—about a block from Starbucks—two young ladies behind the counter discuss the last time they had a Slurpee. Ten people chat and sip coffee on the patio at 6 p.m. Three people hang out inside, reading and pecking on laptop keyboards. An alternative music mix of new wave and punk permeates the brightly colored coffee house.

“We’ve raised our game as a result of Starbucks being there,” Java Jungle proprietor Matt Polley says. His coffee shop offers new furniture for patrons to lounge upon. Polley plans to barbecue off the patio and increase deli menu items. He’s getting the word out over electronic media, doing direct mailers and flyers.

“We’re an eclectic, beatnik coffee house,” Polley says. Java Jungle’s been in business 16 years. Open mic night on Monday’s at 8 p.m., where patrons share poetry, music, magic or comedy, has been a “huge success.” He also displays rotating local artwork on the walls. He says he hasn’t noticed a drop in revenues due to Starbucks down the street.

Surviving big boxes
The challenges facing Reno coffee houses are the latest variant on problems that have plagued local businesses for years, particularly since the Carter and Reagan administrations when Congress and the administrations began taking permissive attitudes toward economic concentration and deregulation, even when predatory practices were at issue.

When big box Barnes & Noble opened in Reno, two locally owned bookstores shut down. When Tower Records came to town, a CD store on Keystone Avenue closed. When Office Max and Office Depot opened Reno outlets, Siri Office Supply on Wells Avenue held out for a while, but then was forced to close—and Custom Office Supply later failed in the same location ("Chain reaction,” Aug. 28, 1996).

One local store that survived chain store challenges is Sundance Books, which was hurt by Barnes & Noble’s arrival and, later, by the opening of Borders Books, but rebounded and continues to operate today.

Asked what he would tell other local merchants who must combat conglomerates, Sundance co-owner Dan Earl said the ones that have the best chance are those that reached a size in their operations and built up enough of a customer base to get them over the initial hit they’ll take. Once the novelty of chains wears off, business starts flowing back again to the local stores. Many of the stores that went under did not have the “critical mass to keep going,” he said.

“Many people think that we’re just a—if they’ve never been to us before—just think we’re a tiny little cubbyhole in a strip shopping center or something. And they get inside and they say, ‘Well, this is a lot bigger than it looks.’ … Plus, we also had about 10 years of business before the big boxes came in.”

Earl says local businesspeople need to communicate better with the public to demonstrate that they offer some things to the community that conglomerates do not.

“Part of it is being a part of the community, making donations to things that impact our local society and economy.”

Of course, the chains also do that, but charities that come to rely on big box money sometimes find it disappearing—the valley’s history is littered with seemingly impregnable chains that shut down or departed, such as B. Dalton and Gemco.

Most important, Earl says, is that locals need to understand that when they purchase at the big boxes, they are shipping capital out of the community, and local merchants need to do a better job of explaining that.

“A lot of people don’t understand that. They see Starbucks, they see Barnes & Noble, they see Office Depot, and they don’t understand that half of the money or the profits that go into that are shipped off to headquarters in New York City or to shareholders anywhere else and not back into the local community.”

The market dictates how many coffee shops can thrive in one metropolis. More Truckee Meadows Starbucks are likely underway. Whether that means a loss of diversity and local merchants going out of business is not yet certain.

“We allow for evolution, and we’re happy to do it,” Polley says. “We suspect we’ll continue to have great success.”