For the fact is that Starbucks is the best thing that ever happened to small, mom-and-pop coffee shops: it ratified their product and gave them a huge market of gourmet coffee drinkers which had previously barely existed. What's more, given that the smaller shops nearly always are much friendlier and more pleasant than Starbucks – not to mention much more likely to serve their coffee in china, rather than in paper cups – the mom-and-pops have a built-in advantage over any Starbuck's.
Starbucks itself has demonstrated time and time again that opening a new location very close to an existing location does no noticeable damage to the sales of the older store. The big green Starbucks signage works these days essentially as a reminder to "drink coffee now" – in that, it actually helps drive traffic to the smaller place next door or possibly down the road.
I've pointed this out to people several times in the past, but nobody ever believes it. What they don't realize is that prior to Starbucks, the standalone boutique coffeeshoop was quite the rarity in the US. CEO Howard Schultz has said in the past that his inspiration came in Italy, not in the US. Another thing that people don't really take into account is that Starbucks isn't all that cheap. It's not like they're selling ventilattechinos for a dollar a pop, so unlike, say, arguments about Wal-Mart, small shops can't reasonably claim to be undercut.
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