Starbucks to Close 400 U.S. Stores as it Leans into Off-Prem Model
Over the next 18 months, Starbucks will accelerate the expansion of “convenience-led formats” -- such as drive-thru, mobile order only Starbucks Pickup and curbside pickup -- to meet changing customers behaviors in the wake of COVID-19 pandemic.
Off premises, including drive-thru, carryout and curbside pickup are here to stay, at least for the foreseable future. With dining rooms closed coast to coast, drive-thrus have dominated off-prem, according to a recent SMG study. More than 75% of consumers surveyed have used a drive-thru in recent weeks.
The pandemic has accelerated a digital transformation that will not be temporary but rather mark a new normal in consumer behavior in a post COVID-19 marketplace, according to FIS Research.
Integrating Physical & Digital CX
Starbucks is fast-tracking these off-prem formats to meet consumers’ evolving needs of convenience, connection and personalization offered through a digital experience. Essential to this initiative is the Starbucks App that includes mobile ordering and paying ahead and the engagement of Starbucks Rewards’ 19.4 million members.
Starbucks’ 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 during these times of social distancing.
Prior to COVID-19, Starbucks says approximately 80% of U.S. transactions were on-the-go, driven in part by the ability to order and pay ahead using the Starbucks App.
“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,” said Kevin Johnson, CEO 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 U.S. store portfolio transformation includes the expansion of new Starbucks Pickup stores in dense markets including New York City, Chicago, Seattle and San Francisco, and the addition of curbside, drive-thru and walk up windows in suburban areas.
Starbucks is closing 400 corporate locations in the U.S. and Canada, but is planning to open 300 new stores during the current fiscal year, reports USA Today.
Starbucks 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 orders.
The first Starbucks Pickup store has been operating in NYC's Penn Plaza since November and a second location will open at 42nd and Park.
Customers will soon be able to use the Starbucks App to order and pay ahead as well as check-in at designated parking spots at the store once they arrive.
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.
The company plans to continue to expand and enhance the drive-thru 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.