On May 28 2013, the Starbucks on the west end of the 2nd Street shopping district closed, ending a 15-year competition with independent coffeehouse, Polly’s Gourmet Coffee. When it opened in 1997, it became the second Starbucks location on the street, with another several blocks away. The move sparked such attention that it reached all the way to the New York Times’ Sunday edition.
A week before the rival chain closed, Mike Sheldrake, owner of Polly’s, sat across from his antique coffee roaster and reflected upon what he calls the “Starbucks episode.” When he found out the Starbucks a few doors down was closing, one of his first responses was, “Finally.”
Sheldrake’s immediate reaction when Starbucks opened shop on the next block in 1997 was “abject desperation.” He recalled, “We thought we were going to go out of business.” He had already seen business drop after the first Starbucks opened down the street, off Covina Avenue. “We eventually got into a very serious financial condition,” he said.
Polly’s business model, focused on selling coffee beans and giftware, hadn’t changed at all since it opened in 1976. But with direct competition from not one, but two Starbucks stores, Sheldrake sought change. “We were very fortunate in that one of our customers was just starting a business consulting operation,” he recalled. “His name was Bob Phibbs – he’s the Retail Doctor.” He hired Phibbs.
“He asked the hard questions, demanded the proper performance and did not take any excuses, which was extremely hard on me because all I had were excuses,” Sheldrake said. First on the agenda was cutting freebies for employees. “One of the employees quit at that meeting,” he remembered. “All the customers left.” Despite the initial exodus, “In seven days, my sales went up 11 percent without making any other changes.”
Next, Sheldrake and Phibbs implemented a “three-part marketing program.” Phibbs asked Sheldrake about his vision for Polly’s future and made him explain the function of every item in the store on a tape recorder. His responses were turned into a test for employees. “Staff had to pass the test with 80 percent comprehension. We had 18 people on staff and we went through 63 W-2’s that year,” he said.
Once Sheldrake had a trained staff dedicated to his vision, he updated the store’s exterior and interior. An ad campaign defined chain stores as ordinary with Polly’s as the local answer to coffee. “All of the ads said, ‘Down the street from ordinary.” Sales went up 45 percent.
One of Polly’s standard business practices also gave it leverage. “Coffee loses 25 percent of its flavor in the first 14 days after it’s roasted. Starbucks has a 90-day shelf life on their coffees, and some of the other chain stores have a shelf life of up to a year,” Sheldrake explained. Additionally, the shop had “tremendous local support.”
Sheldrake, who has lectured about business at California State University, Long Beach, and Pepperdine University, offered advice for other small business owners. “Learn from the big corporations the proper way to run a business. I’m talking about inventory control, accounting, finance, training, marketing and merchandising.” If a business owner doesn’t understand the numbers, he said, then “you don’t have a business, you have a hobby.”
He continued, “What they have to learn is that they have the ability to micro-market to the community and give service, quality and connectivity that the chain stores just can’t get.”
As Starbucks leaves, Polly’s is not only still standing, but has grown its business. Sheldrake reflects, “It was a very painful thing when Starbucks came in, but it was a catalyst for change, learning and growth that every small business owner has to face in order to be successful.”