Consumer use of digital technology has risen at a prodigious rate, fundamentally altering how many industries function (fig 1).1 Within the food service industry, Starbucks was an early participant launching Wi-Fi in its stores and partnering with iTunes Music in 2007, adding digital gift card integration in 2012, and accepting mobile orders for pick up in its American stores in 2015. 2, 3 The move towards mobile ordering was met with excitement with Howard Schultz stating that Starbucks was “building an unassailable position“ in the market.2 While filled with opportunity, this effort has not been without challenges both from an operations and from a cultural standpoint.
Mobile orders at Starbucks increased to 7% in early 2017, up from 3% the year prior. In the highest volume stores this translates to one out of every four Starbucks orders originating on a mobile device. 4 However, over the same period Starbucks reported a 2% decline in overall transactions and concerning stock price fluctuations.5, 6 Central to this dichotomy, these issues are attributed to difficulties encountered with servicing mobile orders, a new customer stream that has increased wait times by up to ten minutes per person (fig 2).7 Industry experts describe increasing lines as mobile purchasers are reticent to “cut” and congestion in the drink handoff area is worsening, both leading to decreased satisfaction and company sales.5, 8 From a cultural standpoint, the rise of mobile platforms, and digitalization of the coffee ordering process threatens the ethos of the “coffee house”. The Starbucks experience is built on the bedrock of human interaction, as a location for coffee connoisseurs and others to purchase their daily coffee, conduct meetings, engage in phone calls, or spend the day working and studying.9 A shift to mobile ordering risks eroding this “coffee house” culture and changing Starbucks into a frustrating and time consuming stop on the way to another destination.
To combat the increased foot traffic and wait times Starbucks is working to implement creative solutions. They have improved the physical space adding signage to more clearly separate customer groups, developed a text messaging system to inform customers when orders are ready, and they are adding “to go” windows and extra baristas where appropriate (fig 3).8, 10 The company is also rethinking production methodology. For example, stores typically have two espresso machines, only one of which is utilized. Starbucks is experimenting with assigning mobile orders to one machine and in store orders to the other. Innovations such as these have decreased wait times by up to sixty seconds, and increased customer satisfaction.8 Starbucks is also adjusting its digital infrastructure. For example, the rewards system has been updated to provide benefits based on total amount spent rather than total number of purchases, as customers have been incented to enact multiple small transactions, slowing overall throughput time. Additionally, Starbucks updated its mobile platform whereby customers can now retrieve food in locations other than the counter or register, and baristas can track wait times after an order has been placed.8
Looking ahead, Starbucks’ approach must be multi-pronged. While continuing to remedy inefficiencies in the short term, it is imperative to build future sustainability. This will require a thorough analysis to understand the purchasing journey of the mobile purchaser and those coming in off the street. There will be opportunities to gain efficiencies if Starbucks understands the differences between how each class of customer utilizes the stores. This may enable innovations such as exploring small standalone stores located alongside the traditional store. In this example, efficiencies can be gained through separating production lines and customer types. In concert with this, Starbucks should pursue solutions to make the mobile experience as engaging as coming in person an effort that they have prioritized lately. 11 This will be paramount as Starbucks is facing pressure from many sides, electronic sales of coffee and equipment empower the home barista, local shops attract new customers, and non-coffee shop locations dilute the brand experience.12
Starbucks has maintained itself as a specialty coffee brand for the connoisseur, a core mission and vision that Starbucks has cultivated since 1971.9 However it remains unclear whether or not embracing mobile functionality will move it away from this identity and push it in the direction of commoditization. Will Starbucks be the place people come for their beverages because it represents quality in coffee? Or will they come because it represents what is convenient – a commodity?
An industry leader, Starbucks must work to stay at the forefront of changing consumer preferences. It will be imperative for them to identify new challenges and to continue to be first, different and unique.
- Lobaugh K. Navigating The New Digital Divide: Capitalizing on digital in uence in retail. 2015.
- Alba D. Starbucks’ Grande Plan: Selling Coffee Via Apps. Wired, 2015.
- Madhani A. Starbucks launches don’t-wait-for-your-frap app across USA. USA Today, 2015.
- Taylor K. One of Starbucks’ biggest strengths is becoming a huge problem for the chain. Business Insider, Vol. 2017, 2017.
- Jargon J. Starbucks Tempers Revenue Forecast: The company says popularity of its mobile app creating long lines at pickup counters. The Wall Street Journal, 2017.
- Starbucks Corporation Interactive Stock Chart [database online]. Insert City of Publication Here see notes; 2017.
- Taylor K. We went to Starbucks every day for a week to see if the coffee giant has fixed an annoying problem. Business Insider 2017.
- Jargon J. Mobile-Ordering Apps Create Problems for Restaurants. The Wall Street Journal, 2017.
- Younge Moon JQ. Starbucks: Delivering Customer Service. Harvard Business School: Harvard Business Publishing, 2006.
- HENDERSON P. Starbucks is having trouble keeping up with mobile orders. Business Insider: Reuters, 2017.
- Loten A. Digital Leaders to Laggards: ‘The Journey Never Ends’. The Wall Street Journal 2017.
- Page P. Today’s Top Supply Chain and Logistics News From WSJ [Business: Logistics Report web site]. 2017. Available at: https://www.wsj.com/articles/todays-top-supply-chain-and-logistics-news-from-wsj-1510141986. Accessed 11/15/2017, 2017.