Cannibalization of Starbucks

Now, you may read the title of this post and think that I'm going to start on some rant about the Starbucks density in my neighborhood. I'm sorry to disappoint you. There are many blogs and articles serving that capacity. In fact, a quick Google search acknowledges this.

No, rather I wish to discuss the newer phenomenon of having two Starbucks within the same suburban shopping center, notably a stand-alone Starbucks competing with a Starbucks-within-a-supermarket (SwiS). In the Sacramento area, these SwiS version are located with Safeways. A search through the Starbucks locator reveals the existence of SwiS in Albertsons stores also.

Now, I shouldn't be questioning the economics of the Starbucks versus SwiS phenomenon since I'm sure Starbucks corporate bean counter have already done the analysis. I'm more interested as to why as a consumer I would choose going to a Starbuck rather than a SwiS. For instance, at a Safeway SwiS, by using my club card, I am awarded a free coffee drink of my choice after 7 coffee purchases. Let's do some simple math here, if I am purely a regular coffee drinker (at a price point of $1.50), I would be enjoying 8 cups of coffee at the price of 7.

7 / 8 = .875, so that is a 12.5% discount

For a drinker of regular coffee, you'd save 18.75 cents per cup.
For a drinker of Venti Frapp, you'd save 56.25 cents per cup.

Of course, the math doesn't take into account if you plan on "gaming" the system by normally ordering regular coffee and splurging your free drink on a Venti Frapp. Or normally ordering a Tall or Grande, but utilizing a Venti for the free drink. Or adding shots to the free order when you normally don't. Or doing a run for your office mates and giving yourself the free one.

I suppose if you're a person of means and don't care to save 18-60 cents each time you need a Starbucks hit, you've probably stopped reading this post long ago. Otherwise, why choose the Starbucks over the SwiS? Is it the ambiance? The big comfy chairs? You need the location for a business meeting? Ok, I have to question your business if you hold meetings at a Starbucks. It's not really a "business" meeting. It's you having a social get-together.

Anyhow, I'm guessing the business lost to the Starbucks is gained by the customers that might not have been customers if the SwiS was not so conveniently located inside the supermarket. Perhaps there is a licensing fee or per cup fee that is paid to Starbucks corporate. Anyone have any insight?