Can Starbucks Really Be Considered A Local Business? (Our Co-Founder's Candid Observations From LSA19)
LSA19 CELEBRATED LOCAL BUSINESSES with an outstanding conference topped off by a performance of memorable Beatles songs by very talented impersonators.
I’ve spent seven years now in the “SMB space,” well past the 10,000-hour mark at this point, so you might say I’m a grizzled veteran. But it was my first time at the Local Search Association (LSA) Conference (an institution in the local and small business space) this past month. It was a great time all around, peaking (for me) with a Beatles cover band under the stars. Wigs, Sergeant Pepper costumes, accents and all.
LSA19 SET THE STAGE for lively, thought-provoking, and productive discussions about the current state of local and small businesses.
Greg Sterling and I had an entertaining chat about Alignable and, more generally, about the SMB & Local space. It’s interesting to look at an industry with fresh eyes - and I’ve had the good fortune to do it many times for a variety of industries. Enough to spot significant patterns that might be harder to spot for veterans that might be even more grizzled. Here are five observations from the show.
1. Is Starbucks A Local Business?
Don’t mean to pick on Starbucks (sorry Starbucks - I love you), but when we talk about local business use cases should we be talking about Starbucks? Yes, they have local stores and employ local folks (with excellent benefits, I might add). But in terms of market and brand power, they’re about as different from a small, local business as you can get.
There’s a very obvious spectrum of scale in local: from large (Starbucks) to medium (Ace Hardware -- Yes, I love you, too), to medium-small (auto dealerships - I do love some of you, not all of you), to small (your local kitchen store, salon, etc.) to super small (my future yoga instructor).
As a business selling into this market, it’s easier to build products and services for large and medium businesses. It can be tough to serve the truly small + local businesses, because they all have diverse needs and are tough to reach. As one agency owner I met put it, “It’s hard to build a business on $200/month per customer.”
I get that. But it’s also the most socially important, personality-rich, and rewarding end of the spectrum to serve. Let’s keep helping those high LTV accounts like Starbucks, Ace Hardware and auto dealerships, but we need to be more innovative to help the truly local + small. The good news -- they’re not that tough to reach anymore. We have millions of them talking to each other on Alignable about what products and services to buy. Come talk to us, maybe we can help you out.
2. Are Marketing Agencies “Boxing Themselves In?”
A futurist who happens to work at a marketing agency (you know who you are :-)) was speculating about the plethora of companies offering “agencies in a box” software, the increasing smarts in offerings from Facebook, Google et. al., and what it all means for the future of agencies. “Push a button to manage your SMB accounts” doesn’t seem like a sustainable strategy. Marketing automation is awesome. But missing out on the human element of customer service could ultimately leave marketing agencies, and their customers out in the cold.
There are tens of thousands of advertising and marketing agencies on Alignable, but less than a thousand are “Highly Recommended” -- recommended in writing by at least five of their clients. Even allowing for an engagement multiplier of 2 or 3X, you’re still looking at a small percentage of SMBs that are happy with their marketing agency. Or at least happy enough to recommend them to new customers. Some soul searching is in order, for sure.
3. 10 Billion Messages
A talk by Facebook’s Philip Rather mentioned that 10 Billion messages have been sent between business pages and consumers in the past year. That’s a 4X improvement over the prior year.
It’s not clear what percentage of those businesses are in the U.S., or how many are small + local. Or how many of those messages are to Starbucks requesting out-of-season concoctions. (I told you, I love Starbucks). No matter how you look at them, those are impressive numbers. Alignable isn’t at 10 billion messages yet, but we’re seeing a tremendous growth rate in B2B messaging between small business owners in group chat.
Messaging dominates our lives as individuals. And it’s clear we’re in the early innings of a sustained acceleration of both B2B and B2C conversations. This means that small business owners who want their conversations to have a strong impact need to provide solutions that stand out based on know-how, customer service, and most importantly, personality.
4. Networks Fuel Marketplace Momentum
Both Facebook & Nextdoor’s local consumer marketplaces have momentum. It points to the leverage engaged networks have in scaling marketplaces. I’ve heard mention (no hard data) that Facebook is one of the largest auto marketplaces already. (Man, that didn’t take long!).
And Nextdoor’s local recommendations seem to have some traction for home services. While Nextdoor isn’t strictly a social graph, it is a unique sort of graph - a disconnected set of complete local community graphs. Does the future of local marketplaces belong to networks? The trust and engagement that’s baked into successful (identity-based) networks helps them scale certain marketplaces rapidly.
The greatest trust comes from high-affinity relationships where the graph aligns (yes, we use that word a lot) well with the products or services being sold through the marketplace. So Nextdoor is connecting small, local neighborhoods of consumers. It’s logical that they’d ask each other about plumbers, electricians, and perhaps, local businesses to frequent.
We see relationships being formed between business owners based on prior relationships, proximity, business category, and around topics of interest. The graph aligns (ahem) well with a vendor marketplace. And sure enough we see a high level of activity, as well, around vendor search and selection.
5. It’s All About Trust
So, speaking of trust, I made the point on stage that “Trust isn’t just important. Trust is everything.” A bit hyperbolic, perhaps. But considering that 60% of brand vendors on our SMB Trust Index have a negative NPS, very relevant.
Small & local business owners (i.e., not Starbucks) look at their vendors as either trusted partners or as vendors helping them with a specific solution. Churn doesn’t just hurt vendors. It’s tough for business owners to find a good vendor, invest in using them only to discover it wasn’t doing the job as advertised. Especially when those business owners are busy, can’t delegate the job to someone else (read: definitely not Starbucks), and don’t have a whole bunch of time to research those vendors.
For networks like ours or LinkedIn, trust isn’t just the relationship between our members and us (as it is for most vendors). It’s actually the relationship of our members to each other. And that, in turn, rubs off on the vendor and the entire network.
Regardless of what you’re selling, if a vendor sees a small business owner exclusively as a target for a sale – that sentiment will show up in their products/services, and interactions with the business.
Conversely, If they see it as a relationship, over time it shows. And as that relationship grows, trust is fostered and leads to more opportunity for both the vendor and the small business owner.
Comments (1-10)
I agree with those who answer yes and no, but I lean towards no. As a franchise they are managed and run by local people. They may or may not be able to support other local businesses and community charities. They definitely have the advantage of national branding and marketing. This puts them in a different category from truly owned and operated small, local businesses. These business have complete autonomy to make purchasing decisions that support other local businesses and are able to give back to community charities as they choose. These factors traditionally prove to bring and keep more money in their local community and this makes them genuinely a local business. Likewise, these small businesses must strive independently to brand and set themselves apart in the marketplace without the aid of a major firm. This also separates them from big name competition. A sizable hurdle to leap but not impossible when it is easier for them to build trust, integrity and superior service. I will always choose my locally owned and operated coffee shop over Starbucks
A local Business is one which resides in your community. Would I define all local businesses as a Small business enterprise? no biut the question is local not size.
For me local businesses consist of:
1 - Direct Sales/ on line - a business owned and directed by one/two persons with products purchased from a larger name business, serves local community needs, can sell across the country or world, usually has no employees as required by their agreement with the company providing products to them.
2 - Franchise businesses - usually owned locally, employs locals and serves a local community, local marketing
3 - Corporate businesses (Kroger, Starbuck's, etc) - the stores are certainly local and employ local talent, Part of their business employs other national/global assets which affect someone's local economy. We know these large er businesses encourage employees to be involved and give back to the local community
4 - the small mom & pop businesses who are supporting their family, the employees & families to provide a service for residents within and 15-25 mile radius. Sometimes more. These folks are known well be their neighbors.
conclusion of my opinion: all the businesses in your neighborhood are local. How much is local depends on the type and encouraged participation of the corporate and local management. Because not everyone is meant to own and run a business, just like not everyone is meant to be a carpenter or college graduate.
Do I miss a local grocer? Do I miss the handyman? Do I miss the local diner and restaurant? do I miss a local church feeling at church? the answer to all of these and more is yes.
When we return to demanding quality over quantity, we may return to some of these businesses. Hour lunches, time spent with co-workers once a week to know them instead of just work with them, Technology may bring us closer in many ways but it has forced us farther apart in terms of knowing our neighbors, wanting more has us stealing our children and grandchildren's love of the game because now it is a tool to go to college and make more money ...
If we want all local businesses, you must support a different style of life.
Having a forum where trust can be built within your community is vital. Unfortunately very few online or offline places offer this in a way in which trust can be mutually nurtured. Kudos to Alignable for building and maintaining that platform. My hopes is that it builds into a global phenomenon.
On Fire Success LeadValetsOur local Starbucks locations employ lots of people, especially students. Additionally, many business owners and professionals use Starbucks several times a week, including myself, to meet like-minded people, and conduct business meetings. The newly constructed ones in New Mexico have lovely patios and of course, FREE WiFi services. I tried a couple local spots, and they seemed to have discouraged business meetings and/or didn't support technology. I'll continue to support local businesses, but I do love my local Starbucks.
Yes! Local people work at, run and manage the Starbucks that you patronize. It is most likely a franchise with a franchise owner. Let's look at this from another industry. Is your nearby Chevy, Buick and Lincoln car dealership considered a local business even though they represent a mega corporation? Yes! Thank goodness we have individuals with the strength and leadership to bring jobs to the local economy.
No. Starbuck is not a local business. A large corporation, and/or a franchisee owns the business.
A local business is own and operated by a resident of the surrounding communities and most of their transactions are local, purchasing and selling to other merchants nearby. A long lasting local business will employ and support local families for generations.
The local Starbucks at Kingston Road and Bingham was jokingly referred to as the new anchor store by other businesses in the area when it opened.
The truth is that it draws people to the spot and this does benefit adjacent businesses who have acknowledged that fact so in that regard it is a good thing.
Local locations of Starbucks can be considered local businesses as they cater to local patrons and likely buy at least some of their supplies locally. They would also sponsor local charities and events. In that sense they do contribute to the local economy, so are not very different from other locals in the area....
They can, so can Subway, as well as Walmart, even Ford "can" be considered local but, wait, as business people, (or fish), we can take a previous local "mail order" company, give it a website and call it "global". Then could we not take a global company, plunk it in an appealing demographic, hire some locals, engage the immediate community and call it local? This is the shrinking playing field of Local vs. global commerce. If all things are relative, (or one is from, oh say, Proxima or even Tethys), then global IS local.
As a coffee and occasional sweets eater, and as someone who loves the intricacies of business, and as much I would just love to tinker with the idea of Starbucks (SBUX, aka $88.8 Billion market cap) being a local business, at the end of the day it’s not.
A business is a dream and purpose to fill a void that exist in the universe. A local business would be one, then, that originated by a local (founded by) or in which a local has a vested interest in it (franchise).
Starbucks, although a beautiful thing in many eyes, is not owned by a local, at least not where I live. Instead it’s owned by a corporation headquartered in the state of Washington. It’s not even franchisable.
The people working there are recruited locally, yes, but Starbucks gets the lionshare of all profits and stakeholders benefits. Once a store is no longer meeting criteria for operations, it shuts down and everyone is let go. No one is held accountable for their livelihood, at least locally :).
They make a killer dirty chai latte that is fantastic in the summer that I look forward to having. However to say they are a “local business” is not how I perceive their massive brand. They are about as local as Wal-Mart, McDonalds, and ATT corporate stores.