Searching Cost: Is Starbucks Our Best Choice?

Starbucks, known as the finest coffee provider, became a global coffee retailer. Since the first store opened in 1971 in Seattle, it has grown worldwide to about 12,500 branches with $8 billion revenue, and Starbucks furthermore has plans to have 40,000 branches. The number that Starbucks plans is even greater than the number of branches that McDonalds, the biggest global company with 31,000 braches, has. The Starbucks is not only the finest coffee provider but also the largest coffee provider.

There is no doubt that Starbucks, best coffee retailer, is emerging as a culture guru. The most important reason behind is location of the store. Simply, Starbucks is everywhere, so most people see at least one Starbucks shop in daily routine. Low searching cost, which is the basic cost until purchasing is made including time taken, is huge comparative advantage for the stores that have low price items like coffee. The time that consumers spend (searching cost) is more valuable than the coffee price. Likewise, when comparing the coffee price of usual coffee provider such as Starbucks and minimum wage in America, the price of coffee would not really affect consumers' decision-making process. Therefore, it is reasonable for people to go to Starbuck unless McDonalds or Subway, the largest franchisees, has better or same quality coffee.

However, recent consumer reports compared coffee - black with no flavors, milk or sugar - from McDonald's, Burger King, Dunkin' Donuts and Starbucks, say McDonald has better coffee than Starbucks, and even actual price of coffee and searching cost (number of branches) is less than Starbucks. Therefore, people actually might be able to spend less money and buy better products, but demand for Starbucks is still higher than any other competitors, and no one can easily expect that demand for Starbucks would decrease.

Basically, when it comes to purchasing decision, people only spend money if their benefit is greater than or equal to cost expected, and it can be applied everything, even item like coffee, which is everyday item and cheap. Since we realize that McDonald has less cost than Starbucks, the customers that go to Starbucks must have more benefit than choosing other coffee providers. According to the Wall Street Journal, average Starbucks coffee drink contains 320 milligrams of caffeine which is the highest level in the marketplace. Maybe, Starbucks is the best taste coffee, maybe people need more caffeine, or people are just rich enough to spend whatever makes them look better.