21 Jun Starbucks Just Announced a Drastic Change. What Every Company Can Learn From It
Starbucks is introducing the new Starbucks Pickup, a new idea to transform the company’s strategy
Things are changing at Starbucks.
Yesterday, the coffee giant released its latest SEC filing. It begins with a five-page letter “to all Starbucks stakeholders,” and is signed by the company’s CEO and president, Kevin Johnson, and its chief financial officer, Patrick Grismer.
While strikingly optimistic in tone, the letter reveals that Starbucks will close up to 400 company-operated stores over the next 18 months. It points out that the company typically closes about 100 stores in the Americas every year, primarily because of lease expirations and other circumstances.
But the really big announcement is the reason behind the closures.
According to the letter, the company is laying the foundation for a “transformational phase” that will introduce a new store format known as “Starbucks Pickup.”
“Starbucks Pickup is tailored to customers who prefer to order ahead and pay through the Starbucks mobile app for pick-up, or those who want their Starbucks delivered to them by placing an order through Uber Eats,” the letter explains.
“We believe this transformation of our store portfolio, blending Starbucks Pickup stores with traditional Starbucks stores in dense metropolitan markets, will elevate the customer experience and position Starbucks for long-term growth.”
What makes this idea so radical is the fact that Starbucks built much of its brand on being what former CEO Howard Schultz described as a unique “third place,” the place between work and home that customers could go to meet friends, get work done, or simply hang out.
Which leads us to the most powerful line in the letter:
No matter the format, we know that the Starbucks “third place” experience occurs from the moment a customer envisions their daily Starbucks Experience to wherever they enjoy that Starbucks beverage.
This is a major shift in strategy–a statement that the “third place” has become more symbolic than literal.
Of course, it makes sense that customers wouldn’t want to hang out in their local Starbucks in the middle of a pandemic. But here’s the interesting thing: According to Starbucks, the data indicate that this change in customer behavior was clearly noticeable before the rise of the novel coronavirus.
For example, Starbucks says that even prior to the Covid-19 outbreak, it discovered that about 80 percent of transactions in U.S. company-operated stores were for “on-the-go” orders. This insight led the company’s leadership team to reexamine U.S. stores and devise a new strategy that could capitalize on changing customer behavior.
In fact, according to the letter, this process of reevaluation and redesign of the store experience has already been underway for two years.
This is more than a brilliant series of moves on the part of Starbuck–it’s also a lesson in emotional intelligence, the ability to understand emotional behavior and put that knowledge to work.
Let’s break down what exactly Starbucks did.
First, the company leveraged data from its mobile app and store sales to see clear changes in consumer behavior. At the same time, company leadership had a realization about the brand.
Yes, it had taken the company years to establish its reputation as that “third place.”
Years of giving away free Wi-Fi.
Years of allowing stores to become remote offices for thousands, if not millions, of people.
Years of building an emotional connection between customers and stores.
But with that emotional connection firmly in place (and the data to prove it), Starbucks leadership had the confidence needed to make adjustments that it hopes will allow the brand to become more efficient and improve customer experience.
And now that the coronavirus has essentially changed the world, Starbucks is wasting no time executing its strategy–in fact, accelerating previous plans.
We have here a great case study in how businesses can stay relevant, and take advantage of a negative situation to make positive changes.
What business leaders can learn from Starbucks
If you own a business, chances are that you have changes you’ve been wanting to make. Maybe you were just starting to put things together. Or, maybe you already had a full strategy in place, and were searching for the right time to execute.
Well, for all the negatives that Covid-19 has brought to your business, it has the potential to do one thing positive:
It can give you the inspiration and the motivation to finish your plan and put it into action.
But what if you didn’t have any changes planned?
Well, now’s the time to take a long, hard look at your business, both pre- and post-pandemic.
- What about my customers has changed in the past two to five years, and what can I learn from it?
- What am I not currently offering that would interest my customers?
- How can I improve the customer experience? How can I make things easier for them?
It takes time to ponder these questions and come up with substantial answers. But once you have them, start working on a strategy to execute.
If you can test it, great. But don’t worry about making it perfect. Get started, and make adjustments as needed.
Because if there’s one thing Covid-19 has taught us, it’s this:
When it comes to the need to take action, there’s no time like the present.