Starbucks is closing locations primarily due to several key reasons: changing consumer preferences, economic pressures, and a strategic refocusing of the business. The company is responding to shifts in the coffee industry, including preferences for local and artisanal coffee, increased competition, and economic challenges such as rising costs for materials and labor. Urban locations have seen reduced foot traffic due to pandemic-related changes like remote work and population shifts away from city centers. Financial performance issues at some stores and the inability to create the experience customers expect are also factors. The closures are part of a $1 billion restructuring plan by Starbucks, which includes closing about 1% of its North American stores (around 400-500 stores) and laying off approximately 900 employees. Despite the closures, Starbucks plans to continue opening new stores and investing in its business, with a focus on improving customer experiences and digital engagement. Some mobile-order and pick-up-only locations are being closed or converted to traditional coffeehouses to prioritize more meaningful interactions.

Reasons for Store Closures

• Consumer shift towards local, artisanal coffee and less frequent visits to urban Starbucks due to remote work
• Rising costs of coffee beans, labor, and rent squeezing profit margins
• Increased competition from independent shops and fast-casual chains serving coffee
• Underperforming stores that do not meet Starbucks' financial or customer experience standards
• Strategic focus on digital, delivery, and highest-performing stores

Impact and Future Plans

• Closure of around 1% of North American stores, approximately 400-500 locations
• Layoff of about 900 non-retail employees
• Conversion of some mobile-order/pick-up-only stores to traditional stores with seating
• Continued expansion with plans to open new stores in the coming year
• Concentration on creating a physical environment that customers and partners expect and improving profitability

This restructuring aims to enhance customer experience and business resilience amid evolving market conditions.