As the American middle class shrinks, Starbucks sees Ferguson store as a blueprint for the future
Now, that might be changing.
One year after Starbucks opened its first store in Ferguson, Missouri, success of the store and others in low-income communities is helping challenge assumptions of what the "typical" Starbucks looks like.
In Ferguson, where 22% of people live below the poverty line, the Starbucks store is turning a profit and has seen 15% sale growth since opening, with a low rate of turnover among employees, according to the company.
The Ferguson store is one of five shops Starbucks has opened in low-income areas in the last year. The other stores are in places like East Baltimore; Jamaica, Queens; and Englewood in Chicago's Southside - areas where Starbucks hopes to contribute to economic revitalization by providing jobs, worker training programs, and partnerships with local women- and minority-owned businesses. Starbucks has committed to opening at least 15 of these stores by 2018.
Of course, 15 stores represents a tiny percentage of the coffee giant's 25,000 locations. But Rodney Hines, Starbucks' director of community investments for US retail operations, says that he believes that the lessons learned in these stores will help inform where Starbucks opens the 10,000 new shops it has planned globally in the next five years.
Hines says turning a profit has always been central to the plan of opening stores in lower-income communities.
"When we look at the true value and the intent of these stores, we've tried to break it down in three ways," Hines told Business Insider. "What are we doing as local economic development? What are we doing to inspire our customers and community in terms of engagement? And, lastly, how is it affecting our business?"
Hines says he never worried that opening shops in low-income communities would impact how people would perceive Starbucks' brand, which has attempted to portray itself as an achievable luxury over the years.
"I grew up in a similar community in West Philadelphia, where there isn't a Starbucks in my neighborhood, but I always had a comfort in going to a place like a Starbucks," he said. "Personally, when I look at Cordell [Lewis, a employee the Ferguson store] and how he manages that store, and how he connects with the community in and around Ferguson… He is doing, in that store, fundamentally what we want to happen in all of our stores."
Starbucks' success has been built on providing a social hub for customers. In lower-income communities, the need for these spaces is often even more urgent. Hines says that he measures the success of the Ferguson store in how well it has established itself as a community center, as it has become the site of job fairs, poetry readings, and school board meetings.
With middle-class communities shrinking, finding customers elsewhere may be crucial for Starbucks' growth. Between 2000 and 2014, middle-class populations decreased in 203 of the 229 metropolitan areas reviewed in a Pew Research Center study. In the same period, the real median household incomes in the US fell 8%.
Still, not everyone is pleased by Starbucks entering a new neighborhood. For some, the coffee chain's expansion into lower-income communities sparks concerns regarding gentrification, something that has been linked to the coffee giant's presence in the past.
Hines is aware of these concerns, and says that he works to speak with local church, government, and other community leaders prior to opening up shop to ensure Starbucks is helping - not hurting - locals.
"My aim for those conversations is to really ensure that we're a part of a bigger plan for that community that is really a part of preserving the welfare for families living in that community," he said. "This is not a plan for gentrification. The last thing we want to do be seen as part of quickening gentrification in any communities."