[kevinventullo]

Naively, a small shop only needs to pay on-the-ground workers and direct owners who may be a subset of the first group. Starbucks has to pay the regional managers and their bosses and the shareholders, etc. Also, at the mom-and-pop, no one is screaming “Why is the fourth derivative of profit increase not higher??”

[listenallyall]

I think that is, indeed, rather naive. Starbucks has an extremely efficient supply chain which ensures its raw ingredient costs are lower than what the small shop can negotiate, even moreso when delivery to the store is factored in. After raw wages, it can also offer health insurance and benefits to its employees at significantly lower per-employee costs than the small shop. It can often get a better deal on real estate, because landlords know that Starbucks adds prestige and enables them to raise rents on surrounding units. And of course, while mom & pop have to spend money advertising to the neighborhood with flyers, direct mail, coupons, etc, the Starbucks just posts that green mermaid logo and lots of people flock to it (and often are willing to pay more for the product).

[shiroiushi]

It's not naive; both posts have correct points. It's the classic little-company vs. big-company scenario. Little companies can move faster and adapt quicker, they don't have the same profit expectations or overhead costs as big companies (upper manager and CxO salaries), however the big company has big advantages with economies of scale, name recognition, and access to capital. Some things for the big company may work against it: some people may go out of their way to avoid Starbucks (or other big name-brands) due to some bad experience ("it tastes burnt!") or association or simply disliking bigger companies, for instance.

[listenallyall]

Your post - which at least attempts to list some of the advantages of a small shop AND some of the advantages of a mega-chain - demonstrates why kevinventullo's post is, in fact, naive - because he only mentions the disadvantages that Starbucks might have, without considering any obvious advantages it has, like scale and brand recognition.

[kevinventullo]

If you want to be pedantic about it, the post I was responding to was asking how a mom-and-pop might survive when Starbucks didn’t. Thus, I only felt compelled to name some possible advantages on the one side. It was not intended as an overall analysis. Obviously Starbucks has some other advantages over a mom-and-pop, or else they wouldn’t be everywhere.

[piker]

Also, as with the starving artist, supply may be artificially high.

[kevinventullo]

I grok the sentiment, but reckon artificial is not the right word.