Back in 2018, Starbucks hit the news for its bathroom policies. As Vox reported at the time:
Starbucks will treat anyone who walks into one of its cafes as a customer, whether or not they buy anything, the company said on Saturday. The announcement is the latest step the coffee company is taking as part of its ongoing response to the public outcry over the arrest of two black men at a Starbucks in Philadelphia. The men were waiting for a business associate to arrive and had asked to use the bathroom in April when Starbucks employees called the police, eventually leading to them being arrested and escorted out...
The arrest of Rashon Nelson and Donte Robinson on April 12 in Starbucks kicked off a major firestorm. The company initially issued a less-than-satisfying apology, and CEO Kevin Johnson later issued a lengthy statement on the incident in which he apologized to the men arrested, laid out plans to investigate the incident, and affirm Starbucks’ stance against discrimination and racial profiling. “You can and should expect more from us,” he wrote. “We will learn from this and be better.”
What effect did the change in bathroom policy have? In a 2020 paper, Umit Gurun (University of Texas at Dallas), Jordan Nickerson (MIT), and David Solomon (Boston College) investigated that question. They first collated anonymised cellphone location data from SafeGraph (which I really wish was available for New Zealand, but it turns out is only available for the US, UK, and Canada), and compared the change in monthly visits to Starbucks before and after the policy change, with the change in monthly visits to other nearby coffee shops, and the change in monthly visits to restaurants (essentially, this is what we refer to as a difference-in-differences analysis). Using data covering the period from January 2017 to October 2018, they find that:
...Starbucks stores experienced a 7.0% decrease in visits after the enactment of the policy, compared with similar coffee shops and restaurants... After the policy change, Starbucks saw a small time-series increase in visits, whereas absent the policy a much larger increase would have been expected. Put differently, the general boom in visits to all coffee shops at the time helped disguise the fact that the new policy appears to have significantly reduced visits to Starbucks.
So far, so unfortunate for Starbucks. However, Gurun et al. aren't done. They look at how the effect of the policy differed depending on the distance to the nearest homeless shelter, and find that:
Strikingly, the decrease after the policy enactment is significantly larger the closer the location is to a homeless shelter. Stores less than two km away experienced declines of 8.5% relative to nearby coffee shops, while stores more than 10 km away experienced declines of only 4.8%. Again, this decline in attendance is not from worsening economic conditions in these areas – rather it captures the change in Starbucks relative to nearby coffee shops experiencing the same local economic conditions.
Their results hold when they switch to a synthetic control method as a robustness check. Interestingly, they have some evidence that different types of customers are affected differently as well:
Starbucks also experienced a significant change in the demographics of who visited the store. Relative to other coffee shops and restaurants, Starbucks saw a larger decline in visitors from relatively wealthier home locations. The estimated income of Starbucks customers declined by 0.4%, relative to changes in other coffee shops and restaurants... Despite the racial angle on the initial controversy, we find no difference in the racial demographics of the home locations of Starbucks visitors after the policy. In other words, the new policy appears to have deterred both black and white customers in roughly equal amounts.
To summarise those results so far, Starbucks' change in bathroom policy decreased their customers relative to other coffee shops, and the effect was greater for Starbucks stores closer to homeless shelters, and presumably had a larger effect on its wealthier customers.
Was there anything good that came out of this policy change? Gurun et al. look at the effect on crime for a subset of cities where appropriate crime data are available (Austin, Denver, and Pittsburgh), and find that there was:
...a decrease in public urination citations near Starbucks locations relative to other areas after the policy change. By contrast, a wide range of other minor public order crimes show no significant changes or consistent signs of effects.
The other crimes that they looked at included disturbing the peace, simple assaults/fighting, marijuana possession, shoplifting, theft of service, threats/harassment, and vandalism. The overall question is whether this was a good policy change for Starbucks - Starbucks face all of the cost, but aside from some good press (or, more accurately, a reduction in bad press), the benefits are public. Gurun et al. link this to the private provision of public goods, concluding that:
Our results suggest that companies may be better off focusing on donating money to worthwhile causes, and effectively using a division of labor, whereby Starbucks specializes in making and selling coffee, and engages in CSR by supporting organizations who specialize in social policies. Our results show that trying to incorporate the two within a single company may result in outsized negative externalities for the underlying business that makes CSR possible in the first place.
I don't agree. Despite the adjective, public bathrooms are likely not a public good. Public goods are good that is non-rival (where one person using the good doesn’t reduce the amount of the good that is available for everyone else) and non-excludable (where the good is available to everyone if they are available to anyone). Opening your bathrooms up to non-customers changes the bathrooms from excludable to non-excludable. However, I'm not convinced that they are non-rival. Anyone who has had to queue for a public bathroom would have to agree - one person using the bathroom reduces the amount of bathroom capacity available for everyone else (and makes you wait). So, at least during peak times, public bathrooms are a rival good. Goods that are rival and non-excludable are referred to as common resources.
Common resources are vulnerable to a problem that we refer to as the Tragedy of the Commons, a problem that was first described by William Forster Lloyd in 1833, but was brought to modern attention by Garrett Hardin's 1968 article of that title published in the journal Science. In the Tragedy of the Commons, private incentives and social incentives differ. The social incentive is to keep the common resource well-maintained, so that it is available in sufficient quantities for everyone. The private incentive is to use as much of the common resource as possible, because each user faces the full cost of restraining their activity, but receives only a small share of the benefits of their restraint.
Turning back to the example of public bathrooms, users have a low incentive to keep them clean and tidy. Which is why, and I'm sure you can relate to this experience, public bathrooms may in general be some of the grossest places on the planet. It's little wonder that fewer people would want to visit Starbucks, if the quality of their bathrooms has degraded. The paper by Gurun et al. seems to focus attention on the types of people using the bathrooms (hence, the homeless shelters angle). However, bathroom users don't have to be homeless to fail to keep the bathroom clean.
So, Starbucks likely faces costs on two sides from their policy change - reduced foot traffic (relative to other coffee shops) as shown empirically by this study, and theoretically higher costs of bathroom clean-up as well. And Starbucks' only benefit appears to be avoiding negative attention. Is it paying off for Starbucks? It must be, because the policy remains in place today.
[HT: Marginal Revolution, last year]
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