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HERE I SIT IN MY local Starbucks, sipping an overpriced iced tea comprised of 50% ice. As I am prone to do, I’m observing the customers in line and what they’re ordering. Yeah, I’m that suspicious-looking old man in the corner with iPhone in hand.
What I observe is a line of young, really young people—like less than age 25. What I see is consistent with many other stores where I’ve loitered, that is, lingered.
I anecdotally conclude that a younger demographic is Starbucks’s target. In fact, 49% of Starbucks’s revenue comes from 25- to 40-year-olds, while 18- to 24-year-olds account for another 40%. Starbucks considers its core customer to have an average income of $90,000. I’m not so sure. Neither the average nor the median income for Americans under age 45 is anywhere near that.
I’m pretty sure a big chunk of Starbucks’s customers can’t afford what they spend on their drinks. Yeah, I said it, can’t afford. But, of course, they buy them anyway. They just don’t realize what they can’t afford. Maybe I should give them a break. After all, the under-25 crowd’s brains aren’t fully developed.
How people spend their money fascinates me, especially when I hear that 42% of Americans are struggling financially, that many can’t afford their prescription copays and that they’re unable to save for the future. The average American household spends some 18% of its net income on things like pets, hotels, eating out, equipment for their hobbies, and entertainment fees and admissions.
I’m convinced—using my fully developed and hopefully still sound brain—that at least 80% of households could have a better financial future if they changed their spending habits. In your 20s, it’s easy to conclude that $5 for a drink is affordable, but viewing spending and saving over a lifetime presents a different possibility. Problem is, who thinks that way in their 20s?
The most popular Starbucks drink seems to be the iced caramel macchiato, which on average costs $3.75 to $4.95. Just 80 or so of those Venti-sized drinks would allow the 40% of Americans who can’t come up with $400 to get back in the game. Imagine that: Forgoing the caramel macchiato may be the answer to a financially secure retirement.
I really like Starbucks coffee, but make my own at home and always get it on sale at grocery store. The only time go to a Starbucks is when I am traveling. That has stopped because they no longer make decaf. I did not understand why until I read who their target audience. I will have to find another coffee shop when traveling. Oh well, I never liked Starbucks cultural views anyway.
Starbucks’ success astounds me. I used to work on a very large university campus dotted with Starbucks. I was always amazed how long the lines were for such overpriced drinks. I’ve never had a high income and lead an even more frugal life in retirement. Like others, I will frequent them while traveling, but I often buy just coffee. Perhaps once a month while at home, I’ll splurge on a latte. However, their customer numbers are likely accurate. My son is in his late 20s and works in a fast-growing Sunbelt city. Most of his friends make at least $90k a year. They don’t think a $5 drink is anything to worry about.
It’s the lack of teaching financial literacy in schools and at home that cause young people to behave like this.
I suspect the average Starbuck customer is doing just fine. I don’