With more than 23.000 stores in more than 65 countries Starbucks is the largest coffee shop in the world. You might be wondering how it is possible to achieve this size, and continue to grow both in in-store sales and in number of stores. There are so many regions in the world, but which ones are right for growth? And why do we sometimes see so many Starbucks coffee shops in one neighborhood and none in others? The answer to this question is that Starbucks more than a coffeehouse, is a technology and data driven organization.
Starbucks uses Geographic information system (GIS) to determine where to open new stores. GIS captures, manages and analyzes all forms of geographically oriented data. The company owns an in-house mapping and business intelligence platform called Atlas that helps them analyze access to transportation, consumer demographics, commercial mix, number of offices surrounding the area and many other factors to determine the demand for its products. This platform is used by local partners. In Nanjing for example, a local representative used the platform to find a location with high foot traffic from several office buildings that were under construction to open a new store. The use of this technology enables companies like Starbucks to increase the probability of success of new locations.
Additionally, there are countless ways the company is using GIS data. Starbucks uses it to predict behavior, or even better, trigger desired behaviors in customers. For example, in Memphis the company uses weather information to stablish promotions, therefore if they know a heat wave is coming next week they can create promotions for cold drinks, and also use that information to improve supply chain management. Furthermore large parts of the new products offered are driven by data from customers. They started offering wine and beer at some stores because through Atlas they found locations with high spending patterns and large numbers of people who drink wine outside of home.
As the company sees the returns on investing in Data, they are allocating more and more resources to it. Its mobile app allows them to keep track of what each customer usually drinks, creating an opportunity to introduce new products, create targeted promotions and increase the share of wallet. In the UK for example, Starbucks has seen an increase in foot traffic using location based mobile ads (geo-marketing). xAd, the company powering the advertisements, measures its success by store visitation lift, and Starbucks has had 100 percent increase in visits after customers were targeted in the pilot locations. Finally, recruiting Gerri Martin-Flickinger former Chief Information Officer at Adobe with more than 30 years of experience leveraging technology-based solutions as Chief Technology Officer reflects the increasing role of digital technologies in the company.
If we look at most of these models used by Starbucks to create and capture value we could say that they are replicable by several other companies, but I believe that large part of their success is that they are always innovating and most important creating an ecosystem around data. It is not only about where can I open new stores, but how can I leverage data to predict what customers want, to trigger behaviors given certain events, and how can I use it to generate more efficient operations (e.g. optimize inventory and reduce waste). I believe that an ecosystem like that can only be created by a company that is committed to operate with a data driven approach, but also that has the economies of scale to implement it.