It’s a Starbucks-eat-Starbucks world in Manhattan, experts say.
A financial firm downgraded Starbucks’ stock last week, noting that the chain has opened so many shops that its locations are stealing customers from one another.
Retail and food experts said concerns about cannibalization carry weight in Manhattan, where Starbucks faces competition from a slew of higher-end coffee chains, as highlighted in a BMO Capital Markets report.
But some still suspect Starbucks will expand its footprint near booming neighborhoods in Manhattan as well as in the outer boroughs.
“When Starbucks started out, they were eating up all these little guys, but now there are some real competitors,” said Clark Wolf, a food, restaurant and hospitality consultant.
Starbucks issued a statement saying it has sophisticated tools to measure sales transfer between new and existing stores, and it has detected “very little impact” as it expands its portfolio.
Wolf, however, said he has seen signs that Starbucks over-extended its reach, as he said many chain restaurants did during the economic recovery. He noted Starbucks had trouble hiring enough staff for all its stores earlier this year.
And Wolf said Starbucks is now trying to woo customers from organic, fair trade and other artisanal coffee joints by opening a roastery in Chelsea and a select number of stores that sell “small lot” drinks, reminiscent of small-batch craft brews.
Wolf said he was unsure the strategy would prove successful, given that he anticipates a number of other coffee companies will soon invade New York.
“Will there be room for them? Yes,” Wolf said, noting that the decline of clothing and other retailers has left plenty of space for food and beverage companies. “Will it be successful for everybody? Obviously, somebody’s going to lose.”
But other retail real estate experts seemed to have a more optimistic outlook on Starbucks’ situation.
Jason Richter, managing principal at Hudson, said he previously worked as head of real estate for a 400-store retailer and learned firsthand that companies of any significant size have to consider concerns about cannibalization.
Richter expects to see Starbucks add outposts in the city.
“There’s tremendous opportunity in the outer boroughs to expand,” Richter said. “Speaking to Manhattan, there are still millions of square feet of development underway, which you could argue means that there’s still plenty of room and opportunity for Starbucks to expand in those markets.”
