Photo: Target
August 14, 2023
Can Drive Up With Starbucks Fuel Growth for Target’s Curbside Program?
Target is expanding its Drive Up with Starbucks program nationwide, with plans to let curbside pickup customers add Starbucks menu items to their orders at the more than 1,700 stores with both a Starbucks Cafe and Drive Up service. The rollout, which is expected to be complete by October, will add a potentially powerful differentiator to Target’s omnichannel service.
The process of adding a Starbucks item to a Drive Up order is designed to be as simple and seamless as possible to encourage last-minute value adds. Shoppers are already asked to let Target know when they are on their way to pick up their order, and they will now be prompted to place a food or beverage order from inside the app. The Starbucks and Target orders are delivered to the car simultaneously after the customer arrives at the store.
Target first began testing Drive Up with Starbucks in early 2022 in response to customer requests. The retailer continually developed the process to ensure it was both efficient for associates and enjoyable for shoppers, and it plans to continue fine-tuning operations into the future.
Target’s Drive Up program has been a major component of the retailer’s omnichannel strategy since its launch in 2017, and its importance only grew when cross-channel journeys became standard practice during the pandemic. Target added fresh and frozen foods to the items available for pickup in 2020, and adult beverages became available in 2021.
The expansion of curbside pickup is a natural fit for Target, which fulfilled more than 95% of its total sales from stores in 2021 through its stores-as-hubs strategy. This has enabled more than 10% of the retailer’s total sales to come from same-day fulfillment in 2023.
Convenience adds like Returns with Drive Up and Drive Up with Starbucks are a natural complement to the brand’s growing omnichannel focus. Target opened its first in-store Starbucks location in 1999, and the number of beverages purchased through these stores topped 170 million in 2022 alone.
Curbside pickup peaked when social distancing became the norm during the pandemic, experiencing 49% growth during that year alone, according to data from Insider Intelligence. However, growth has since plateaued as shoppers come to prefer in-store pickup, which is expected to become the preferred BOPIS (buy online, pick up in-store) method for 66.4% of shoppers by 2026. This has resulted in retailers like Costco testing the service on a limited basis but not yet offering it nationwide and Kohl’s focusing on in-store pickup instead.
What might set Target apart are its unique value propositions, like Drive Up with Starbucks, as well as its grocery offerings.
A November 2022 survey by PYMNTS found that 41% of consumers who order groceries online collected them through curbside pickup in the previous month, up from 35% in late 2021. While curbside pickup may be fading overall as it evolves from a modern differentiator into mildly convenient table stakes, Target’s investments may help Drive Up remain a sales driver well into the future.
Discussion Questions
DISCUSSION QUESTIONS: How will the addition of food and drinks to Target’s Drive Up program make it more attractive for customers? Do you expect Target’s curbside growth to continue growing even if the rest of the industry experiences a slump?
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David Naumann
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The volume of drive-up collections at Target has grown sharply and is still growing at pace. Allowing customers, via a prompt, to add a Starbucks to their order is a savvy move. In the trial that Target ran, a high proportion of people bolted on a drink which is extra revenue for Target – and for Starbucks, via the licensing agreement. Interestingly, offering Starbucks also accelerated the growth of drive-up, possibly because people liked the convenience of being able to order and collect a drink brought to them at the same time as getting their main order. This a win-win for both companies. That said, having talked to associates at a few Targets, some struggle with low staffing levels at the in-store Starbucks so this need to be remedied if orders are increasing.
Adding the ability for customers to order a beverage from Starbucks to be delivered with their Target curbside order is a brilliant strategy. It is all about convenience, as busy shoppers can now avoid two long lines at once – Target and Starbucks. If Target continues to make curbside pickup convenient, shoppers will continue to use it as an alternative to parking further away, walking in the store and waiting in long lines.
This is a great enhancement to Target’s drive up service. It also sounds like it could conceivably ding sales at any nearby Starbucks stores. If you are out and about running errands, and you can eliminate a stop at Starbucks by adding that treat to your Target pick-up, then…ouch. Good news for Target and its customer. Not such good news for the Starbucks a block away…which is literally the case in my neighborhood.
Adding food to the Drive Up program will drive more e-commerce traffic and cars to Target. It shifts consumer habits by pampering them with premium service as stores evolve for omnichannel convenience and ease.
This move differentiates Target with a more upscale experience than Walmart and more stores than Amazon.
Performance results will inform Target as to whether to keep investing in curbside excellence.
All the numbers point to Triple Venti Red Eye curbside sales at Target stores everywhere. We are all time-challenged, so consolidating our journey is a gift.
Starbucks and Target have already thrived from their partnership. This will help take the combo to a new level by increasing decisions to pick up curbside as an excuse to get coffee (and maybe some other Starbucks items) and boosting add-ons when people feel under-caffeinated while picking up the order they placed from home. Perhaps the biggest differentiator here is the drive-up returns. This will improve retention as well as lifetime value, which is the holy grail.
This will be an exercise in balancing priorities carefully. There is tremendous value in adding enticements like Starbucks to convince online shoppers to bypass shipping in favor of self pick/up. But over 70% of shoppers who go inside stores for order pick-up will buy additional items, which will be negated by curbside.
This is a great idea. It certainly isn’t a game-changer by any means. It won’t be an incentive for customers to start using a curbside pickup to get a coffee. But for those customers who use the service, myself included, this perk adds to the overall value proposition of curbside. For me, and others like me, this adds a bit of incremental revenue to our trips and, more importantly, makes me more likely to shop at Target. Win Win.
What’s not to love about this? Getting a treat/much needed coffee is not only convenient, but a great ‘surprise’ for the customer.
More important, is that it helps offset what I’ve always thought was the downside to curbside pickup up … the loss of the all important impulse and discovery sales. We build these big beautiful stores and fill them with great merchandise only to have them operate as a warehouse when ‘curbside’ sales are promoted. Using tech to entice customers to buy another item or two is a good move.
Better still would have the customer come into the store.
We must be careful suggesting a slump in curbside pick-up post-pandemic. I suspect the convenience of BOPIS (or drive-through) will be on a growth trend ex-COVID.
The food and drink addition will serve as customers reward themselves, just as they might buy a coffee in the cafe as they patrol the store.
The additional is a simple “why not?” strategy, not a grand plan.
I believe that the key to this strategy is differentiation. This is a tie-in that Amazon and Walmart cannot match, given Target’s relationship with Starbucks. Trip consolidation is a key benefit for time-starved consumers, as numerous studies have indicated. Being able to pickup your weekly grocery order and a tasty hot beverage seems like a genius move for both parties, but time will tell if this strategy bears fruit the way we believe it might.
A fantastic move by Target! Consumers love convenience more than ever and most consumers also love the ability to combine trips. Having the ability to add a Starbucks order to your Target curbside pickup order is a win-win-win for consumers, Target, and Starbucks. While many consumers find the increasing delivery fees (and associated prices) to cause them to think twice about local delivery, curbside pickup is becoming an even better choice. Anecdotally, in my area I see no loss of momentum in curbside as a preferred fulfillment choice. Is there a possible downside? Target needs to monitor their staffing needs at stores to handle any increased traffic this could cause. However, I suspect overall staffing requirements for the store already outweigh any issues this could cause.
I’m, guessing a lot of people will like this…or let me clarify: I’m guessing a lot of analysts will like this, since it seems like a pure example of upselling (something which might have seemed impossible with curbside delivery). But whether customers will feel the same way I don’t know. Ever the doubter, I guess, I fear it cluttering up the delivery process. (And if that fails to dissuade, we have a possible safety angle thru encouraging cell use while people are “on the way”.)
I can see a Target Pick up Customer adding on a Starbucks item, frankly I don’t see a Starbucks customer adding on a Target purchase. Someone deciding to buy at Target based on also being able to pick up a coffee – not so sure.
Target’s Drive up program could alleviate a notorious issue with this retailer, and that is the big parking lots or multi-level garages customers must navigate to shop in store.
This is a total convenience play by Target, and alone should increase the number of cars headed to this retailer. As well, opportunities abound to increase other retail shopping channels if the digital strategy for the rest of the store is woven into the drive up program.
Nice differentiator for Target to offer the Starbuck’s add-on for curbside pickup. I’m curious to know what basket contents have greatest affinity for adding a coffee drink. I’d guess grocery items? Also which day-parts?
With regard to the safety of having customers notify Target while they are enroute, why wouldn’t the retailer deploy geo-location tech within the mobile app?
As the majority of Target’s customers are parents with kids, this is a strong benefit to removing pain points from the experience. When kids are young, parents are on a timetable with feedings and diaper changes. With older kids, there are non-stop activities parents are shuttling between. Having the ability to get your order fulfilled and treat yourself without making one more stop and getting out of the car is a big benefit and differentiator from the competition.
A driving factor behind any shopping experience is convenience. For Target customers, getting their Starbucks fix while shopping in-store has always been a selling point. Taking that convenience to the next level and bringing it to curbside shows an understanding of their audience and how consumers want to shop. This is another selling point for customers on-the-go, making curbside orders just as convenient as in-store by allowing shoppers to combine their coffee run and Target run into one quick stop.
Target’s efforts to ease the customer’s buying journey have been quite successful. Their curbside pick-ups are a great way for shoppers to pick up items from retailers without ever stepping out of their vehicles. Adding Starbucks items to these pick-up services is another innovation to enhance the post-purchase experience for customers.
However, I wonder how often customers will come to collect their pick-up order and a coffee at the same time. People often sit at a coffee shop to relax while taking in all the vibes and aromas surrounding them. So, even though having your coffee delivered directly to the vehicle seems exciting, I would prefer to have my coffee inside the Starbucks shop.