Everybody likes getting> something for nothing, and Starbucks is the latest establishment to offer free, unlimited Wi-Fi in all its U.S. company-operated stores. But is free Wi-Fi really free if it means shelling out for a $4 latte?
The coffee chain s move to provide free Wi-Fi starting July 1 follows similar announcements from other major chains, including McDonald s. Starbucks move is likely at least in part a response to McDonald s, says R.J. Hottovy, a senior stock analyst at Morningstar. The Wi-Fi announcement also fits with a larger effort from Starbucks to bring that traditional coffee house feel back to its stores, Hottovy says.
Among quick-service restaurants, gourmet coffee and tea shops have been losing ground to hamburger and donut chains, according to research from NPD Group s Consumer Reports on Eating Share Trends. Specialty coffee servings in the year ending in March were up 17% at hamburger chains, up 23% at donut chains, and down 8% at gourmet coffee and tea chains, according to NPD Group.
All quick-service restaurants are also dealing with a core demographic, 18-to-34-year-olds, that has been particularly hard hit by the recession, with unemployment levels above the national average, says Bonnie Riggs, a restaurant industry analyst with NPD Group. In this environment, adding an extra perk for customers makes sense, Riggs says.
While some small, independent coffee shops may have found providing free Wi-Fi wasn t worth the expense, the move is easier for larger chains, Hottovy says. Companies like Starbucks or McDonald s can set up a nationwide corporate deal with a provider like AT&T and likely get a discount on the service, he says.
Starbucks has set its Wi-Fi service apart by also offering users access to exclusive content, including Wall Street Journal articles normally available only to subscribers. That premium offer is well-designed to appeal to the upscale consumer the chain wants to attract, Hottovy says.
While Starbucks says there is no purchase required for using the Wi-Fi service, many consumers may feel obligated to buy something before settling in to work online. SmartMoney used data on consumer spending habits from Mint.com, an online budgeting tool, to get a sense of the real price of free Wi-Fi.
In announcing the new service, CEO Howard Schultz said that free Wi-Fi in my mind is just the price of admission and talked about creating new content that can only be accessed at a Starbucks. The average Mint user spent $22 a month at Starbucks during the first quarter of this year, and the average laptop user at a Starbucks spent about an hour online per session. If, as Hottovy estimates, the average customer spends about $4 per visit, that person would essentially be paying $4 an hour for Internet access. An average Mint user who went to Starbucks once a week for an hour would be paying $5.50 an hour for free Wi-Fi.
What you spend for free Wi-Fi: about $4.75 an hour
More than 12,000 out of the chain s 14,000 U.S. restaurants now offer free Wi-Fi access. The service is a natural fit with the recently introduced McCafe coffee line and redesigned stores, a company spokeswoman says. There are no usage restrictions. The average Mint user spent $20 a month at McDonald s in the first quarter. Hottovy estimates the average customer spends about $5.50 per visit. An average Mint user who went to McDonald s once a week for an hour would be paying $5 an hour for free Wi-Fi.
What you spend for free Wi-Fi: about $5.25 an hour
Barnes & Noble
As of July 2009, consumers at all Barnes & Noble locations nationwide could access free Wi-Fi. The offer is part of the company s effort to make its stores feel like community centers, a spokeswoman says. Customers who have a Nook e-book reader can also access promotions and content that are only available on that device, in store. The average Mint user spent $38 a month at Barnes & Noble in the first quarter making an hour online, once a week, pricier at the bookstore than the fast-food chains.
What you spend for free Wi-Fi: $9.50 an hour
Borders launched free Wi-Fi in mid-October last year and has seen an increase in traffic since the service was introduced, according to a spokeswoman. The service is an added draw for stores that are community gathering places anyway, the spokeswoman says. There are no restrictions on use of the network. Mint users spent an average of $35 a month at Borders in the first quarter. Borders customers spent an average of 2.4 hours online per session in the past three months, according to company data bringing down the hourly cost of a once-a-week visit.
What you spend for free Wi-Fi: $3.65 an hour