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Starbucks may introduce loyalty card to stem poor sales

Starbucks Corporation (NASDAQ: SBUX) is struggling and with Howard Schultz back in as CEO, the company is looking to get its sales moving upward again. One possible strategy? Free coffees, discounts with a rewards card, and a possible expansion of the company's $1 coffee campaign -- with free refills.

Will these plans help boost sales in the midst of a struggling economy? Probably. But, if I were a Starbucks shareholder, I'd be concerned about the damage to the brand. The fact is that Starbucks has become one of the best companies in the world -- that's not an exaggeration -- with an emphasis on quality and customer experience that made it, for a long time, essentially immune to the competitive pressures that other companies deal with.

If Starbucks has to resort to value-oriented marketing like every other company does, then Starbucks is no longer as special as it was in its heyday as a great growth stock.

That said, the stock is down more than half from the 52-week high it reached in 2006, and the company's woes may already be priced in -- leaving the company's strong brand undervalued.

Starbucks' wifi strategy: bonehead or brilliant?

As a warning, I'm one of the .0354% of Americans who have never ordered anything at Starbucks Corporation (NASDAQ: SBUX). Maybe it's the fact that I find the whole idea of a chain of "neighborhood coffee shops" with jazz music and local art a little tacky. Perhaps it's the personal finance writer and penny-pincher in me that doesn't want to spend that amount of money for a cup of coffee. So be warned: I've met people to talk in Starbucks several times but I've never actually bought anything there. When I write about Starbucks, I do so from the perspective of a skeptical non-customer rather than that of a latte-sipping fan.

Starbucks currently charges $6 an hour for in-store access to the Internet through AT&T's T-mobile service, compared to McDonald's which charges $2.95, and Panera, which will let you go on for free. This raises a question: Is Starbucks making itself less competitive by charging for the Internet, or is Panera stupid to give away a service people would gladly pay for (as evidenced by the large crowds at Starbucks)? From a business perspective I think makes sense to charge, if only to keep tables from being taken up by people who buy one cup of coffee and then freeload on the Internet access for two hours (or am I the only person who would actually do that?).

Do you mind paying for Internet access in restaurants? Would you be more likely to frequent a cafe that lets you on for free?

Starbucks buys Coffee People stores, hippies mourn

In my hometown of Portland, Ore., Starbucks Corporation (NASDAQ:SBUX) is seen as the interloper, even though the company's headquarters are only a few hours' drive away. Starbucks gets none of the important descriptors. It's not "local." It's not "independent." And it's very, very not "hippie."

Coffee People, on the other hand, has historically received all of those storied monikers. Founded in 1970s as a booth in Eugene, Oregon's Saturday Market (oh you have never known hippy until you've known the Eugene Saturday Market), the owners burst in the coffeeshop scene in 1983 with a store in the very center of hippy Portland hip-ville, NW 23rd Avenue. When I was a teenager, Coffee People was a mecca of caffeine and I, too, sipped Black Tiger milkshakes (full of ground-up chocolate-covered coffee beans) and munched on Hippie Cookies.

In 1999, Diedrich Coffee Inc. bought Coffee People and the hippiness slowly began to drain away. Quality diminished and the chains lost much of their verve. On Thursday, Starbucks announced it had purchased every last one of the Coffee People retail stores, 40 total and 15 in Portland, for $13.5 million. Deidrich is exiting the company-owned retail business entirely, but will retain the Coffee People brand names, including Black Tiger espresso, its Gloria Jean's Coffee brand, and the franchising arm of 168 retail locations.

As it has with so many other acquisitions, Starbucks plans to conduct rapid-fire conversion, keeping all 40 locations open even though it will mean a bit of cannibalization in some neighborhoods. Coffee People stores will be converted to Starbucks in a few months' time and the hippieness will be lost forever. Good thing Coffee People founder Jim Roberts is still hippy-happening at the little Jim & Patty's Coffee in NE Portland. Will Starbucks soon own every single chain coffee store in the U.S.? It seems not a bit unlikely. And the very antithesis of hippie.

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DJIA+30.6910,464.40
NASDAQ+6.872,176.05
S&P 500+4.981,110.63

Last updated: November 26, 2009: 09:49 AM

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