Tuesday, July 21, 2009

Are Starbucks cheating customers of money?

It's a devilishly clever way for a company with flagging revenue to raise sales. Cheat customers by double charging them. According to several media outlets, as many as one million Starbucks customers were charged twice what they should have been on May 22nd and 23rd. It would be good for shareholders if Starbucks hangs on to the cash. But, the chain says it will pay the money back.

Starbucks, which once boasted that it would have 40,000 stores worldwide, is having trouble making money with the ones it operates now, even though it has closed hundreds of them and laid off thousands of people.

Starbucks has tried to improve traffic to its stores with inexpensive instant coffee and value meals for breakfast. The margins on these products may be so low that double-billing is the only way to move up earnings.

The other option to improve operating margins would be for founder Howard Schultz to work for $1 a year. He is already a multi-millionaire who now has a reputation as a person who is in favor of mass lay-offs. It would be too bad if his company has now chosen to increase sales by double-billing, even if it is by mistake.

Douglas A. McIntyre