Starbucks Learns the Cost of Virtue-Signaling

Everyone remembers how Starbucks responded to allegations of systemic racism by closing down for a whole day of penance (which meant company-wide sensitivity training) followed by the decision that they would open all their locations—and most especially their bathrooms—to anyone without requiring a product purchase. In other words, it was the equivalent of putting out signs saying, “Loitering Welcome Here.”

As they say on the Interwebs, you’ll never guess what happened next! Actually, you don’t need to guess, but in case you’re curious, we have some social science on the question, in the form of a paper from two researchers at Boston College and one at the University of Texas, recently posted to the Social Science Research Network. The paper is entitled “The Perils of Private Provision of Public Goods.” Here’s the abstract, which is pretty startling even without decoding it from academeze (my highlights):

In May 2018, in response to protests, Starbucks changed its policies nationwide to allow anybody to sit in their stores and use the bathroom without making a purchase. Using a large panel of anonymized cellphone location data, we estimate that the policy led to a 7.3% decline in store attendance at Starbucks locations relative to other nearby coffee shops and restaurants. This decline cannot be calculated from Starbucks’ public disclosures, which lack the comparison group of other coffee shops. The decline in visits is around 84% larger for stores located near homeless shelters. The policy also affected the intensive margin of demand: remaining customers spent 4.1% less time in Starbucks relative to nearby coffee shops after the policy enactment. Wealthier customers reduced their visits more, but black and white customers were equally deterred. The policy led to fewer citations for public urination near Starbucks locations, but had no effect on other similar public order crimes. These results show the difficulties of companies attempting to provide public goods, as potential customers are crowded out by non-paying members of the public.

The body of the complete article is even more explicit about the cost of Starbuck’s virtue-signaling, including “the new policy appears to have significantly reduced visits to Starbucks . . . These results suggest that the new policy has been costly to Starbucks. . .”

Too bad Starbuck’s former CEO Howard Schultz chickened out of running for president. Because what the field this year really needed was another hectoring liberal billionaire.

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