Starbucks Announces Expansion of Starbucks Delivers in U.S. and China, First Virtual Starbucks Store in China
Following a strong fiscal fourth quarter and a year of streamlining to focus the company for growth, Starbucks hosted its biennial Investor Conference today in New York City. Chief executive officer Kevin Johnson and other members of Starbucks leadership team updated investors and analysts on the company’s strategic priorities as it aims to expand its retail store portfolio by approximately 6% to 7% net new units and grow same store sales by 3% to 4%, globally, each year while continuing to invest in its partners and elevate the Starbucks Experience.
Through the lens of this commitment, Starbucks leaders highlighted the decisive actions the company has taken to enable more focus on the core value drivers, outlining its ongoing growth model and efforts to build and amplify the brand.
“Coffee is one of the fastest growing beverage categories globally and our over 350,000 partners around the world who wear the green apron are now serving 100 million customer occasions a week,” said Johnson. “We have long been performance driven while staying true to our mission and values to create positive change and global social impact. The leadership team and I believe Starbucks is better positioned than ever for continued success.”
Creating Meaningful Customer Connections
Throughout the Investor Conference, Starbucks leadership team emphasized its renewed focus on the customer experience and operational excellence. In the U.S., Starbucks chief operating officer and group president Rosalind (Roz) Brewer provided details on how the company is progressing against each of its operating initiatives: enhancing the in-store experience, delivering beverage innovation, and driving digital relationships.
Enhancing the in-store experience: Starbucks heritage is built on the third place experience where everyone is welcome and where customers can enjoy high-quality arabica coffee while they stay for moments of connection with each other and with Starbucks partners. Some of the key initiatives Starbucks is undertaking to create an even better experience for customers and partners include:
- Repurposing partners’ time spent on administrative tasks to enhance customer engagement with the goal of improving capacity and throughput.
- Deploying technology to automate inventory planning and replenishment by improving accuracy and efficiency of work routines.
- Optimizing the company’s real estate footprint and store renovation strategy to deliver the next generation of the third place and drive higher financial returns.
Delivering beverage innovation: As Starbucks drives more innovation in its stores while meeting consumer preferences, the company has seen the proven highly incremental results from Draft Nitro Cold Brew. Based on this success, Starbucks announced today it plans to roll out Nitro to all U.S. company-operated stores by the end of FY19 to meet customer demand for this growing platform.
Driving digital relationships: With digitally-engaged customers purchasing 2 to 3 times as many products as those that are not digitally-engaged, Starbucks continues to see significant promise in its digital initiatives as an enabler for customer convenience, awareness and value. To unlock further growth, the company announced three key areas of focus expected to drive 1 to 2 points of comp, including new member acquisition and related spend lift; further adoption of Mobile Order & Pay and the habituation it drives; and upcoming enhancements to the popular Starbucks® Rewards loyalty program enabling customers to redeem for a variety of options, and to earn rewards even faster.
Accelerating Growth in China Through New Digital Initiatives
Starbucks group president, International and Channel Development John Culver provided an update on the strategic partnership in China with Alibaba Group, which was announced in August. This collaboration across key businesses within the Alibaba ecosystem, including Ele.me, Hema, Tmall, Taobao and Alipay aims to enable an even more seamless Starbucks digital experience and transform the coffee industry in China.
As part of this partnership, Starbucks is launching its first-ever, virtual Starbucks® store today in China. The virtual Starbucks store provides customers a one touch digital Starbucks Experience, utilizing the Starbucks® app and Alibaba’s customer-facing mobile apps, including Taobao, Tmall and Alipay. Starbucks customers now have one seamless and easy-to-use consumer interface which enables them to earn Stars in the Starbucks Rewards program for their purchases reaching approximately 670 million Starbucks and Alibaba mobile active users. This latest digital innovation revolutionizes the traditional offline-to-online model by effectively extending the reach of the Starbucks Experience into the everyday lifestyle of Chinese customers.
Meeting Customers Where They Are with Starbucks Delivers
As part of the Alibaba partnership and effort to transform the coffee market in China, Starbucks has been working with Ele.me, China’s leading on-demand food delivery platform with 3 million registered delivery riders, to bring a best-in-class delivery experience to the market. Starbucks has also piloted two ‘Star Kitchens’ within two FRESHIPPO (previously known as Hema) supermarkets in Shanghai and Hangzhou, making Starbucks the first retail brand to establish a dedicated back of house presence in FRESHIPPO locations to utilize its distinct fulfillment and delivery capabilities to further reach and better serve customers. As part of the Investor Conference today, the company announced Starbucks Delivers has reached 2,000 stores across 30 cities in China since launching three months ago.
Leveraging learnings from its delivery experience in China, Starbucks sees further market opportunity with Starbucks Delivers. The company recently initiated pilots of Starbucks Delivers in both Tokyo and Miami with Uber Eats. Today, Starbucks announced plans to expand Starbucks Delivers to nearly a quarter of its U.S. company-operated stores in early 2019.