By Janet Martin
In 2009, when I graduated from high school and left to go to college, my hometown of Hemet, Calif., had a Starbucks wherever you looked. There was one in the mall, two locations downtown, and one within walking distance of every high school. When I came back a few years later, almost every Starbucks had shut down. They could not keep business going and had to choose between going out gracefully or slowly decaying. It’s unfortunate to think of my hometown as falling apart, especially when I think the problem had a fairly simple solution.
What is Over-Saturation?
The problem is over-saturation. This is what happens when big corporations inundate an area with its business. A company gets to be in such high demand that the people in charge decide to expand, adding more stores until there is literally a shop on every corner. In the case of Starbucks, The New York Times reported that in 2008 the coffee corporation had to close 600 locations in the U.S. alone. The paper blames the crashing real estate market, but it does not mention the extended problem of over-saturation. If fewer people are buying and keeping homes, then some areas can no longer uphold multiple Starbucks locations. The area can simply no longer provide the right amount of buyers.
A Paradigm of Over-Saturation
Still a little confused about the idea? Well, this is how I look at it. Imagine that a young entrepreneur decides to open a restaurant in a town of 100. They conduct some research and find out 50 percent of the population go out to eat regularly. The new place is opened and all 50 people decide to go out to eat at this specific establishment and you only need 35 to make budget. A year later, profits are still high so the executives decide to expand and make plans to open a second shop in the same city in order to better meet demand. The only problem is the numbers haven’t changed: there are still 100 people and only 50 percent go out to eat. So now, instead of 50 people visiting one shop that needs 35, you have 25 people visiting one shop and 25 visiting the second. Or maybe it is a ratio of 20-to-30. Either way, neither establishment is making budget, making the market in that town officially over-saturated. This is the problem, but there is a potential solution.
Potential Solutions: Smaller Stores and Vending Machines
Best Buy has a good idea. Although never officially stated as a fight against over-saturation, I think they fixed the problem by moving focus away from their “big box” stores and toward Best Buy Mobile stores inside malls. These are small Best Buy stores that carry only a few popular products, namely cell phones. By opening up these smaller stores, Best Buy is still able to expand its locations, but is doing it in a way that won’t compete with its larger stores. Another potential solution is vending machines.
Macy’s has teamed up with a host of companies to offer their products in vending machines in stores throughout the U.S. Companies like Apple, Skullcandy, iHome and Sony are able to sell their most popular products in a department store like Macy’s, where the core focus of the store isn’t selling electronics, but rather selling clothing, furniture and home goods. Vending machines will not compete against the products Macy’s is selling nor will they compete against Apple stores or other stores that sell the vending machines’ products.
Another potential solution is opening stores abroad. According to The Wall Street Journal, the super store is trying to battle over-saturation in the U.S. by moving overseas. In the long run, however, I feel this will just lead to an even bigger problem: lay-offs and unemployment. And if people aren’t working, then they can’t afford to shop even at Wal-Mart, so then, fewer stores are needed and over-saturation still occurs. At least, that’s how I see things happening.
In the end, it’s still a matter of checking the numbers. The company must check to see which products are guaranteed to sell, and once they do, the company will be able to expand without over-running the market.