You’re disregarding brand appeal.

Starbucks has no real competitive advantage over Local Coffee Co. other than great location, decor and brand appeal too. Thats what OP argues were the deciding factors for them. To attribute nice decor as being nothing more than a sunk cost is erroneous at best.

That's not correct. Starbucks has incredible economies of scale and purchasing power at this point.

Clearly Wework has at least some economies of scale, but as for purchasing power not so much. The mass importation, distribution, and sale of a perishable agricultural product is a whole different kind of thing.

Let’s go with your argument. What economies of scale and purchasing power would make for a differentiable competitive difference vs Local Coffee Co? Are those economies the driving force for Starbucks success? For their competitive advantage in the eyes of a consumer?

WeWork is an international brand. Can you name another coworking space in nearby [state/country]? On the other hand there’s prob a WeWork there with a certain consistency wrt quality that you’d expect.

I can, Regus. They’ve been around forever, this business model is not novel.

But the lack of examples doesn’t support the argument the way you think it does.

That means it’s very much an open question if this model could ever be successful. Unlike chain food/beverage which is a highly proven business model.

But you still haven’t given me an example. Thusly any competitor to come into this space would have to spend as much as WeWork at least to unseat them or to make a competitive brand for themselves. Sure the market’s not new, but the solidified brand in this market is. That counts for a lot.

I have indeed given you an example, it’s called Regus. Google it, they have an international brand too. Wework now has a higher profile.

Good for them, but what’s that worth exactly? Having brand recognition is not at all the same thing as a barrier to entry of a market, or a network effect.

The market for shared or managed office has very low barriers to entry and modest network effects. Thus making the concept of a monopoly in this market more than implausible.

> What economies of scale and purchasing power would make for a differentiable competitive difference vs Local Coffee Co?

If Starbucks spends less money buying coffee, that means they can afford to spend more money on nice decorations (and better real estate, more ads/PR to increase brand presence, etc.) than Local Coffee Co. The real estate/furniture is presumably a relatively small portion of the operating costs of a coffee shop, so e.g. buying 10% cheaper coffee beans could mean getting a location that's two times as attractive to customers.

WeWork might not be able to do that as easily because for them, the real estate and furniture is their only product.

Cost of coffee in cup of latte is less than 25cents and Starbucks sells latte for $4.5. I am sure Starbucks has small price advantage compared to local coffee shop but this advantage is minuscule for widely traded commodities like coffee, milk and paper cups. I doubt that's their main competitor advantage.

Personally for me ability to order Starbucks coffee online and have it ready when I get to the store is a game changer + consistent user experience. Local coffee shops are always hit/miss.

So a competitor to WeWork would have to spend even more than WeWork to compete vs the brand. They’d be even more strapped for cash for PR/ads than the main player. They have the first mover advantage.

> So a competitor to WeWork would have to spend even more than WeWork to compete vs the brand. They’d be even more strapped for cash for PR/ads than the main player.

WeWork won't be able to maintain their venture-capital-fueled level of spending forever. Starbucks' economies of scale aren't a one-time "build the brand" thing, they're a constant source of capital that allows them to continually build and maintain storefronts better than Local Coffee Co can.

I can totally see a world where WeWork, forced by the public markets to attempt to reach profitability, stops putting as much money into their buildings and furniture as they currently are. Then, the next real estate firm disguised as a tech startup can raise private money at a forty-eight million dollar valuation, build even nicer offices, and eat their lunch.

> They have the first mover advantage.

I am not convinced the first-mover advantage is very significant in the short-term office rental industry! WeWork got a lot of customers by selling nice offices at below cost, even though other players in the space had been around longer. Who's to say another company couldn't do the same thing?

Starbucks also has incredible gross margins of close to 60%. Almost as high as a SaaS business (70-95%).

WeWork has 10-15% gross margins.

"Gross margin is a company's net sales revenue minus its cost of goods sold (COGS). The gross margin represents the amount of sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells."

Starbucks also has product consistency. I know a Flat White in Kansas City will be the same as a flat white in Vancouver. If you like that product, that consistency is welcome.

So that would be a similar case for WeWork where you’d expect a bar for quality of offering

Starbucks has good coffee, at least in France it's the only good drip coffee I've found

Additionally to CPLX's point, they can also move profits into low-tax countries by licensing their brand. The fix costs for that are too high for a Local Coffee Co. to copy.