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What Starbucks closures could mean for your daily cup of coffee

Last Updated Jun 10, 2020 at 11:06 am PDT

Pedestrians walk past a downtown Toronto Starbucks Coffee location on May 31, 2018. THE CANADIAN PRESS/Graeme Roy
Summary

A retail analyst says the closure of many Starbucks shops will likely make way for a shift to local

Closures of Starbucks locations will also mean many empty storefronts, analyst says

Starbucks announced Wednesday it plans to restructure its business in Canada over the next two years

VANCOUVER (NEWS 1130) – Picking up a Starbucks coffee has become a daily ritual for many Canadians, so what will the closure of up to 200 shops across the country mean for those people?

It can be hard to walk a block or two in major cities across Canada without seeing the company’s iconic green mermaid. But the Seattle-based chain announced Wednesday it plans to restructure its business in Canada over the next two years.

Retail Analyst Craig Patterson is hopeful it could signal a shift to local.

“Places are starting to look the same,” Patterson, who is the editor in chief of Retail Insider, tells NEWS 1130 of the current landscape. “I mean, Tim Horton’s everywhere, Starbucks everywhere. It’s almost like your communities aren’t being differentiated, or at least on the face. Now, I think there’s an opportunity for independent businesses to step up and create something unique.”

Still, Patterson fears the impending closures of Starbucks locations means we could see empty storefronts.

“We are going to see, I think, an increase in commercial space that will be available for businesses like coffee shops as well as retail,” he explains. “Unfortunately, we are going to see some retailers and food service businesses go bankrupt and they will not come back. What that means is that there will be vacancies. This is going to be challenging for landlords.”

However, at the same time, he believes entrepreneurs will adapt. It will take some time to see how the situation develops, he notes.

There is also the question of reduced demand for coffee shops if working from home becomes a more permanent, large scale change.

Patterson says Starbucks’ announcement came as a bit of a surprise. The company plans to shutter hundreds of shops south of the border.

While surprising, he adds closing traditional coffee shops is a decision that makes some sense.

“Especially as they’re saying that these locations may not close entirely or they may replace them with a grab-and-go concept,” he explains.

Patterson notes Starbucks actually launched a location based on the grab-and-go concept in downtown Toronto just a few months ago, a model that fits with the busy lifestyle of people in metropolitan areas.

Given the COVID-19 pandemic and fears of spreading the virus, he also believes people will be more hesitant to sit down and enjoy their cup of coffee out, opting to take it to go instead.

“This is a way for Starbucks to save money, because they would require less real estate and therefor pay less rent,” Patterson says of the grab-and-go model, adding we’ll likely see other food service businesses and retailers shift to this format in the future.

With more people working from home, Patterson says demand has no doubt dropped, especially in central business districts.

“We are seeing a shift there. Good customer service before COVID-19 was considered to be a face-to-face interaction,” he explains. “What we’ve seen with COVID-19 is a movement toward almost a humanless interaction to prevent infection of COVID-19. Contactless payments, curbside pickup, and in the case of something like say a coffee, if someone isn’t just having it at home — which is certainly more common with the work from home trend — people are looking for something where they’re able to grab it and not interact with a human being.”

The Starbucks closures are among a number of broad changes the company was bringing in amid the COVID-19 pandemic and changing consumer habits.

-With files from The Canadian Press