Photo: Starbucks
Will cloud-based services elevate Starbucks beyond coffee retailing?
In 2017, Richard Branson, founder of Virgin Group, spoke to attendees at that year’s NRF Big Show in New York. The genius of Amazon.com, Mr. Branson asserted, was that the company’s vision of itself was much more than simply being a retailer.
Virgin, which defined itself more broadly than the record stores that once helped make the company a significant force in that specialty retail niche, had extended its brand to more than 400 ventures, ranging from hospitality to space travel.
“People who own retail stores should not think of only being retailers,” Mr. Branson said. “They need to be entrepreneurial and spin off businesses off the back of the retailer to make them money to help the retail stores survive.”
Starbucks is another brand that has expanded its definition of self. The company has moved into consumer packaged goods, distributing coffee and adjacent beverage categories to retail stores and online.
Now, the coffee giant is looking to use its experience and technical learning to become a service provider for other foodservice businesses with the planned launch of a cloud-based platform providing end-to-end solutions focused on improving the customer experience in restaurants.
Starbucks has signed a licensing agreement with Brightloom, formerly eatsa, to develop a suite of solutions from the coffee giant’s digital flywheel. The companies will partner in the development of cloud-based solutions for restaurant operators designed to better connect customers via mobile ordering, third-party deliver solutions and more.
“We have experienced first-hand the power that comes through digital customer connections that are relevant to the customer,” said Kevin Johnson, Starbucks CEO, in a statement. “The results we’ve seen in customer loyalty and frequency within our digital ecosystem speak for themselves, and we’re excited to apply these innovations toward an industry solution that elevates the customer experience across the restaurant industry.”
Discussion Questions
DISCUSSION QUESTIONS: Will a cloud-based platform elevate Starbucks beyond being just a coffee company? Will other foodservice retailers be receptive to a digital suite of solutions that has Starbucks behind it?
Poll
BrainTrust
Oliver Guy
Global Industry Architect, Microsoft Retail
Patricia Vekich Waldron
Contributing Editor, RetailWire; Founder and CEO, Vision First
It’s a natural extension for Starbucks to move out of the traditional brick-and-mortar locations. They have a great product line (beyond the on-location consumables), and giving access to their customers via an app or website is a great opportunity. The risk is small and the payoff could be big.
Apparently the high end coffee market is tapped out. I’m not sure this is the direction I would have gone in, but going in a different direction is smart. Walmart’s doing it, but in adjacent markets in its core business.
If I were Starbucks, would I pick another segment in food service? Probably. I suppose their theory is they’ve already invested the capital in their software, so why not leverage that expense. I don’t see it catching on.
If I were another food service retailer, would I be receptive to a Starbucks solution? Probably not.
Starbucks is already more than a coffee company. The brand is a lifestyle statement. Millennials didn’t flock to Starbucks to drink coffee, they went there to be cool. The cup itself is a badge and a social statement. It says “this is who I am” and differentiates Millennials (and all who want to be viewed as progressive and cool) from Luddite geezers like me who still prefer Dunkin’ coffee and don’t mind being seen with the cup.
This is very similar to the question of a retailer debating whether to use AWS to support their business or not. A tricky one – however if Starbucks is able to offer a white label set of services to enable food service companies expand faster, easier, and cheaper than other methods then this could become a very good proposition. With the AWS question we have seen examples where retailers have experimented with AWS as a way to test things before moving to another provider, so we might see something similar …
Licensing its technology platform and customer experience to other restaurants is a clever way to create additional revenue streams for Starbucks. It will be interesting to see if Starbucks’ competitors like Peet’s or Caribou will be interested in accessing this technology or if they will be excluded from access.
Starbucks has been a leader in innovative technology, especially in mobile apps, payments and loyalty programs. I assume many restaurant companies will be interested in tapping into best of breed solutions that are proven.
I see two challenges. 1. Being a tech solution provider is very different than developing and restaurant technology for ones own retail/restaurant operations. I’ve seen a number of companies unsuccessfully attempt this model in the past. 2. As an operator, it’s one thing to admire a competitor’s systems, it’s another to decide to stake one’s company’s destiny on them.
This makes absolute sense. It’s sort of like vertical integration: “The companies will partner in the development of cloud-based solutions for restaurant operators designed to better connect customers via mobile ordering, third-party deliver solutions and more.”
Regarding the comparison to Amazon, I’d say be careful and look closely at the differences if you are a retailer considering this. I once interviewed with AWS for a marketing job for retail and posed the question of how you sell the service to businesses that view you as competitive? The answer was they operate AWS separately from Amazon Retail — which is a fine point lost on most people in the retail space. It’s all Amazon, right? One business losing money, propped up by a high margin business. Brands selling on Amazon to improve sales is one thing, but for retailers the thought of using AWS for anything is hard to swallow when you are in competitive category. Big opportunity for Microsoft and Google.
I think both Walmart and Kroger have made similar moves already or are considering them. These are not food service like Starbucks but it’s good for the overall health of the retail space that options to AWS for competitive cloud services exist, especially ones tailored to industry needs and which are complementary.