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Beyond the third place: Starbucks adapts US business strategy in the face of COVID-19

Starbucks has announced plans to accelerate the transformation of its store portfolio in the United States through the integration of the physical and digital customer experience.

These changes are accelerated due to a retail environment that has shifted because of COVID-19, and to meet the already evolving customer needs of convenience, connection, and personalisation offered through a digital experience.

Over the next 18 months, Starbucks will increase convenience-led formats in company-operated locations with drive-thru and curbside pickup options, as well as Starbucks Pickup locations.

These store features are enabled by the Starbucks App, which the company says is integral to ordering and paying ahead, as well as engaging the company’s 19.4 million Starbucks Rewards members. 

“Starbucks stores have always been known as the ’third place,’ a welcoming place outside of our home and work where we connect over a cup of coffee,” says Kevin Johnson, CEO of Starbucks.

“As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers.”

The US store portfolio transformation includes the expansion of new Starbucks Pickup stores in dense markets, including New York City, Chicago, Seattle and San Francisco, and convenience-led enhancements such as curbside, drive-thru and walk up windows in suburban areas.

With customers’ increased use of the Starbucks App to order ahead, and the national availability of Starbucks Delivers through Uber Eats, the coffee chain will also renovate select store layouts, including the addition of a separate counter for mobile orders at high volume stores, which will make it easier for customers and delivery couriers to pick up their order.

The acceleration of the store transformation was shared in an open letter from Johnson as part of the company’s plan to navigate and adapt to a new COVID-19 economy and shifting consumer behaviors.

The letter says Starbucks will blend the traditional sit and stay café with new on-the-go experiences and reposition its network of stores to best serve its customers.

On the go experiences
Prior to the COVID-19 crisis, approximately 80 per cent of Starbucks US transactions were on-the-go, driven in part by the ability to order and pay ahead using the Starbucks App.

While the pandemic has disrupted customer behavior, Starbucks says its strong digital relationships, combined with the ability to adjust locations through store renovations, relocations and new builds, and add new store formats, are unique strengths that it will lean into as part of this plan.

This strategy aligns closely with rapidly evolving customer preferences that have accelerated as a result of COVID-19, including higher levels of mobile ordering, more contactless pick-up experiences, and reduced in-store congestion, all of which naturally allow for greater physical distancing. 

Starbucks Pickup
Following strong sales and enthusiastic customer and employees response, the company has committed to the expansion of the Starbucks Pickup store. These locations are intended for customers in dense metropolitan markets looking to order and pay ahead using the Starbucks App on the way to their next destination.

The first Pickup store has been operating in Penn Plaza in New York City since November 2019 and soon a second location in New York City will open at 42nd and Park near Grand Central Terminal. Since opening, Starbucks says customer engagement has been high and feedback on the store design and customer experience has been positive. 

Curbside Pickup 
In addition to Pickup stores, customers will soon be able to use curbside pickup from their car. Customers will use the Starbucks App to order and pay ahead as well as check-in at designated parking spots at the store once they arrive. Starbucks says curbside pickup is an experience accelerated due to the COVID crisis as well as customers’ increasing need for convenience in on-the-go occasions. Over the coming months, Starbucks will increase the number of stores that offer Curbside pickup as well as pilot a select number of locations to exclusively offer this format. 

Drive-Thru
Starbucks plans to continue to expand and enhance the drive-thru experience for customers, including opening new locations outside of densely populated cities and in new markets. The company will also design new experiences that could include double lane drive-thru, or drive-thru plus curbside pickup, all of which would leverage the ordering and payment capabilities of the Starbucks App.  

For more information, visit www.starbucks.com

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