Some 18 months after a racial incident in Philadelphia led Starbucks to institute an official policy to open its U.S. coffeehouses and bathrooms to anyone, regardless of whether they make a purchase, a study finds the Seattle giant may be paying a big price for its pledge to be a third place for all people.
Monthly visits to Starbucks dropped 6.8% compared with other nearby coffee shops after the open-bathroom policy was put in place in May 2018, according to a joint study released Tuesday by academics from the business schools at the University of Texas at Dallas and Boston College. The study, conducted in collaboration with the data company SafeGraph, examines aggregate and anonymous cellphone location data from more than 10 million devices between January 2017 and October 2018.
It covers nearly 10,800 U.S. Starbucks locations and measures them against other cafes and restaurants nearby.
“The decline in visits to Starbucks is large and significant,” the 43-page report says.
Starbucks disagreed with the finding. “As evidenced by our earnings reports, customers are visiting us in record numbers,” spokesman Reggie Borges said. “The study focuses on cell phone user data. What we are seeing is real customers.”
U.S. comparable store sales in the fiscal year through Sept. 29 jumped 5%, including a 3% increase in average spending and a 2% gain in the number of comparable transactions that indicate traffic, Starbucks said in October. Q4 U.S. comparable sales rose 6%, the best performance in over two years. CEO Kevin Johnson said at the time Starbucks continues to see “traffic growth across all dayparts.”
With the free bathroom access, the researchers looked at the proximity of a given Starbucks store to a homeless shelter and found that customer traffic declined at almost double the rate at stores closest to homeless shelters versus those farthest away. The researchers also found fewer citations for public urination in nearby Starbucks locations as a result of its policy change.
Customer traffic wasn’t the only thing that was hurt. The average income of Starbucks’ customers has dropped compared with the average income of other nearby coffee shops, thanks to fewer visits from “its wealthier clientele.” “This would be consistent with them being more sensitive to crowding and the new visitors brought in by the bathroom policy,” the paper says.
Meanwhile, customers who visit its stores spend on average 4.2% less time in Starbucks compared with other coffee shops following the institution of the official policy, according to the research. The decline is also bigger at locations closest to homeless shelters.
“The small number of non-paying visitors who do linger and use tables and bathrooms have an outsized effect on the total number of visitors, who either stop coming and/or spend less time in the store,” the study says. “It’s unlikely that moving from the quasi-public bathroom policy to a completely open public bathroom has benefited Starbucks unless the customers increased their purchase significantly. … None of this considers any extra staffing costs involved in greater bathroom maintenance.”
While Starbucks’ latest results suggest it can withstand any potential negative impact from its bathroom policy, the study highlights the dilemma public companies like Starbucks face: how to engage in “socially responsible” activities that may not align with shareholder interests.
It’s not “clear whether provision of public goods leads to increased shareholder wealth,” the paper says. “At a certain point, stores must decide how much to curtail the provision of the good to non-patrons, who may also actively deter others’ purchases. … The negative consequences of Starbucks policy suggest that profit-maximizing companies will be likely to underprovide exactly for those groups who have the lowest willingness to pay.”
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I have covered the retail industry for well over a decade and written for publications including the New York Times, the Wall Street Journal and Bloomberg News. I have also been ranked as a top industry influencer since 2013. An innate curiosity about how things work and what sets one brand apart from another drives my coverage, described as “a distinct voice in a sea of noise.” I’m noted for my ability to distill scoops of insight from commodity news and create ahead-of-the-curve trend-setting pieces. Interviews with newsmakers or on-the-ground coverage of major events aren’t the only things that interest me. I’m just as eager to take in the stories of consumers. My passion in storytelling goes beyond retail. Originally from Taiwan as an ambassadorial scholar and having penned many columns about life and culture, I’m equally driven by a sense of mission to tell stories that inspire and touch hearts