Does Starbucks have a big delivery opportunity?


At its investor day on Thursday, Starbucks said that, in a partnership with Uber Eats, the chain will roll out home delivery to nearly one-quarter of company-owned stores in the U.S. by the end of the second quarter.
Starbucks has been exploring delivery for years and tested a program in Seattle in 2015 with Postmates. The renewed push comes as McDonald’s recently partnered on delivery with Uber Eats. Yum Brands, owner of Taco Bell, KFC and Pizza Hut, has partnered with Grubhub on delivery as well.
Starbucks Delivers program launched three months ago in China with the promise of delivery of hot and cold drinks within 30 minutes or less. Done in partnership with Ele.me, the delivery unit of Alibaba, and its three million registered delivery riders, the program has reached 2,000 stores across 30 cities in China.
Starbucks has further pilots underway in both Tokyo and Miami with Uber Eats.
For the China rollout, Starbucks created spill-proof lids, tamper-proof packaging and containers that support hot and cold items. Starbucks CEO Kevin Johnson told CNBC that some drinks may be unsuitable for delivery, such as a cappuccino, because of likely foam overspill. Mr. Johnson said, “We were very thoughtful about this.”
The launch comes as Starbucks is facing slowing traffic to its domestic stores.
Writing for the Wall Street Journal, Julie Jargon noted that, although many chains say delivery reaches customers who don’t want to dine out, delivery fees on small orders can irritate consumers. She also said Starbucks may be challenged delivering “quickly and while still hot — something that could be particularly problematic for coffee.”
- Starbucks Outlines Growth Agenda and Announces Expansion of Starbucks Delivers in U.S. and China at 2018 Investor Conference – Starbucks
- Starbucks cuts long-term earnings per share forecast; shares fall – CNBC
- Starbucks to Offer Coffee Delivery Across U.S. as It Seeks to Reach More Customers – Wall Street Journal
- Starbucks partners with Uber Eats, will expand coffee delivery service to nearly 2,000 U.S. stores – Geekwire
- Starbucks delivers – RetailWire
DISCUSSION QUESTIONS: Do consumers want coffee to be delivered to their homes and offices? Will the biggest challenge for Starbucks likely be more about executing delivery or stimulating demand?
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34 Comments on "Does Starbucks have a big delivery opportunity?"
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Chief Executive Officer, The TSi Company
President, The Ian Percy Corporation
You’re a wise man Art! Good advice. Starbucks will soon realize that you can’t fool all the people all of the time!
Owner, Tony O's Supermarket and Catering
I totally agree. Are we that lazy that we can’t pour a cup of coffee?
Food I get, with some exceptions, but unless they are adding to fresh baked goods with the coffees, it won’t attract a huge following. Starbucks for my wife is a treat to chill out in a mall, or on vacation. To have it delivered who knows, but I don’t see this as a huge boost to the bottom line. The coffee is expensive enough, plus the up charge, so we’ll see.
Managing Director, GlobalData
Delivery is a good idea, especially to offices and workplaces. However, delivering drinks quickly and while still hot might be a challenge.
Though the biggest potential problem is coping with the additional orders. Traffic to Starbucks stores might be slowing but wait times are often poor, especially during peak periods. Starbucks has to find a way of managing increased volume without damaging customer service.
President, The Ian Percy Corporation
“We were very thoughtful about this.” Oh come on Starbucks. I’m sorry, but when I can get “Starbucks Coffee” beans at Costco (and IMHO there is better and cheaper coffee) and have a whole fresh hot pot of it at a fraction of the cost in my own home…why on earth would I want someone to drive it to my house at even greater cost, throwing away all the packaging an hour later, and all for one cup? This country has gone mad!
Chief Executive Officer, The TSi Company
I couldn’t agree more…spot on!
Founder, CEO, Black Monk Consulting
Principal, Your Retail Authority, LLC
Absolutely!
Chief Executive Officer, Progress Retail
Is it the normal $2.50 delivery fee? I can tell you there are plenty of folks in my generation (in cities) that order Uber Eats or Grubhub from food outlets that are a stone’s throw from their condo or apartment. I’m curious to know the delivery fee (Uber Eats standard $2.50-$3.50?), but I don’t see coffee being any different pending the product arriving in the optimum condition.
President, Rubinson Partners, Inc.
Starbucks must do this to stay relevant to the way that shopping is going. More online buying, more virtual working, less foot traffic to come in off the street. I’m sure this will be more than just delivering coffee and will include food. Morning meetings, Friday morning treats for the office, friends coming over for brunch — I think this is a nice extension of Starbucks “life.”
Principal, Retail Technology Group
Starbucks delivery is a push. It might work for the non-coffee items it sells but I can’t see paying delivery fees as a consumer to get a cup of coffee. Pizza, hamburgers, fried chicken, Chinese? Yes! Coffee? No!
President, Integrated Marketing Solutions
Have you ever been in a business meeting with Starbucks delivered in a box? I have several times and it’s definitely NOT the same experience or anything that tastes like the same coffee. HUGE quality delivery problems. Not to mention cost. The $5 coffee just went to $7 or $8.
President, b2b Solutions, LLC
Customer may want Starbucks to deliver their coffee, but unless they have found a way to keep it hot the customer will not be happy with what they receive. No cup on the market today will keep coffee hot for 30 minutes. To keep coffee drinkably hot you would need to have it in a thermos type of container such as a Contigo or other brand.
I have not seen, nor am I ever likely to see, the container referenced in the article but having been in the c-store industry as a retailer and now as a consultant I can tell you people are very particular about the hand and mouth feel of their coffee cups. I see the announcement as a way to for Starbucks to say “hey we deliver too,” but I don’t see it having any significant impact on their sales.
Founder | CEO, Female Brain Ai & Prefeye - Preference Science Technologies Inc.
A cup of Starbucks delivered at home? At the office? Out of occasional desperation, possibly. It seems wasteful for both humans and the environment. Not to mention constant Starbucks price increases.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
I’m sitting at Starbucks right now. After reading the discussion topic, I am thinking why would anyone want Starbucks delivery? I am a really big coffee drinker (maybe a dozen or more cups a day). I am a really big Starbucks fan and I like their coffee. But, delivery?
As several of my colleagues pointed out, If I want coffee at home I can make excellent coffee. Get it immediately. And have it at a much lower cost.
I go to Starbucks to be in the store. To sit, relax, and spend time on RetailWire. I watch others come in and get their coffee on their way to work or to get out of the office for an afternoon break.
The Starbucks mantra “Creating a culture of warmth and belonging, where everyone is welcome” doesn’t include delivery nor is it the thought Howard Schultz started the company with.
As for looking at becoming more than the ubiquitous McDonald’s or DD, check this out.
Retail Transformation Thought Leader, Advisor, & Strategist
Having been to the Starbucks Reserve Roastery in Seattle, I am looking forward to checking out the NY edition. Yes, this may well be the ultimate expression of a coffee lifestyle! Where else will you get a $12 cold brew aged in whiskey barrels! (Yes it really does have a unique flavor for those who haven’t tried it!). The concept is brilliant, but I have to say if every Starbucks were turned into one of these, it would lose its appeal. The uniqueness creates a sense of intrigue from the rarity of the location and the experience that results is much more memorable that way.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
I walked by the Roastery in Chelsea the other afternoon and there was a line waiting to get in.
EVP Thought Leadership, Marketing, WD Partners
Oh, save us from more caffeine! This is SO going to work. Starbucks will proliferate even more than they have now. But on the dark side (can’t help it), is anyone else waiting for the “caffeine is bad for you” hammer to drop?
My doctor told me that one cup (actual cup) of coffee a day is not bad for anyone. Two cups; depends on the person’s chemistry. And three cups (just short of a Venti) a day is too much for anyone and not healthy. Given that, I know people who drink at least two huge coffees a day in one form or another. Lots of them, actually. The term “everything in moderation” doesn’t really apply to Americans, does it? Look out below. Question: Is caffeine in the 2020s what cigarettes were in the 1950s?
Anyway, just throwing that out there to see how many “thumbs downs” I’ll get. 🙂
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
After two Ventis at Starbucks, I go home and take a nap.
Retail Transformation Thought Leader, Advisor, & Strategist
Gene, sign us both up for the “coffee has no effect on me” club! Although you have me beat on the coffee cup count per day!
EVP Thought Leadership, Marketing, WD Partners
You guys are addicts! Your tolerance is so high it has no effect on you — I once saw someone ask Andrew Weil if he drank coffee. His reply was, “I don’t do hard drugs.”
Retail Futurist + CEO @ MeSpoke
I’m on the fence — I still enjoy the physical Starbucks experience. Why not focus on bringing me and my associates back in?
The affiliate (driver) opportunity could be a stepping stone for Starbucks — gaining last mile touch-points is valuable.
Apple Pay + Apple Watch = innovation which gets us closer to never going into our pockets or pocketbook.
I think the Starbucks and Uber Eats deal is a chess move which pays off much farther down the board.
CEO, The Customer Service Rainmaker, Rainmaker Solutions
Starbucks is to coffee what Amazon is to everything else you could possibly want. One difference is Amazon delivers tomorrow and Starbucks has to figure out how to deliver in minutes. When I first read this I thought it was not something needed or possible. But then I thought about this being about Starbucks and its cult following. The determiner to success with this program is not going to be what Starbucks does to get the coffee delivered timely and inexpensively; but how the customer responds to it. Someone is going to have to pay for the delivery costs. I doubt it will be Starbucks. China has many delivery people that ride bicycles. That is not going to happen here.
Retail Strategy - UST Global
Really? I guess this will work for some people. How hard is it to get up and walk to your nearest Starbucks? With all this “never leave my house and never get out and walk around” convenience, there’s got to be a crowd out there for whom I think the next delivery need will be treadmills! Here’s an idea: a time share for a treadmill ownership. Customers can book it online and use it for a scheduled hour a day. You pick it up and deliver it to the next Grubhubber/Uber Eater in need of some exercise. Who’s in on this one with me?
Chief Amazement Officer, Shepard Presentations, LLC
I can’t imagine there’s much margin in delivering a hot cup of coffee a mile away. Is Starbucks willing to charge the fee to cover the cost, if not eliminate a loss, on a delivery? Consumers want convenience, and are willing to pay for it. So the goal is for Starbucks to find the balance of what works.
Co-Founder and CMO, Seeonic, Inc.
Individual cups of coffee will be a challenge for delivery for several reasons: the foam issue mentioned, keeping the coffee hot, and the fee that will be charged for the delivery. These are difficult problems to overcome; coffee will be a challenging category for delivery. Carafes for several people would be a more likely delivery item assuming everyone at the delivery location would want the same item. Starbucks’ biggest challenge is more about stimulating demand with the delivery problems mentioned above. Uber Eats will be solving delivery issues for all of its clients with or without Starbucks..
Principal Writer & Content Strategist, Jasmine Glasheen & Associates
I worked in an office with a Keurig and bought Starbucks whenever I had enough time to wait in the 15-minute line. Why? Keurigs are notoriously unsanitary— especially in an office setting where the elusive “someone” takes responsibility for cleaning it.
Starbucks delivery willl be the perfect way for CEOs to reward their teams, or for office workers to come together and self-treat on a Monday. It’s not “laziness,” but it’s the antitdote to trying to navigate long lines and wait times on a tight corporate schedule.
Retail Futurist + CEO @ MeSpoke
Well said.
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
I am sure there are some people that want coffee delivered to their home or offices, but I think the demand is low for this. The exception is when you are making a big order for a group of people or for a meeting, when a box of coffee often makes more sense.
Delivery execution and stimulating demand are equally as challenging. While it is good to offer consumers choices and options, I think there are better things for Starbucks to focus on, like faster service. Long lines inside and in the drive-thru is a bigger challenge for Starbucks.
President/CEO, The Retail Doctor
Starbucks knows their customer well. They know that customers value convenience over anything else, including price […] It should be a lesson to their lower-priced competitors, such as McDonald’s and Dunkin’, that convenience is always going to win more customers than price. hashtag#retail hashtag#starbucks hashtag#uber hashtag#custserv
Head of Trends, Insider Trends
A big opportunity? I’m not convinced. There may be an opportunity, but only in certain circumstances. For the average person it’s hard to think of a time where paying for a Starbucks coffee to be delivered (with all of the temperature and quality and price concerns that brings up), is a better deal than making one at home/work or going into the store directly. Maybe for a team meeting it might be something you’d consider as it makes the cost of delivery more palatable.
As noted in the piece, the challenge here is to make delivery make sense for a relatively low spend purchase (not to mention the fact that we’re talking about something that doesn’t necessarily travel well). People don’t want to pay half the value of the coffee again for delivery. I can understand why Starbucks feels it needs to explore this avenue, but I don’t expect it to be a particularly fruitful one.
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
I like Uber Eats and I like Starbucks, but I can’t reckon paying the delivery cost for cups of coffee. The packaging waste bothers me too. Then as others mention here, the temperature issue could be a hangup.
Starbucks certainly has reason to offer its products in any and every way its customers desire. I think its decision to partner with a third party tells the tale: If it thought this had truly big potential, Starbucks would create its own delivery service and keep more of the margin.
Retail Transformation Thought Leader, Advisor, & Strategist
Delivery is becoming pervasive in just about every product category, so why not coffee? Yes, there are unique challenges in delivering a quality coffee product, but if Starbucks is willing to see this “experiment” though I have no doubt they will find a way to make it work. The question is — will it be a profitable approach? Delivery costs more and at some point, customers will look at the premium they are paying for delivery over and above the premium they are paying for the product and some may finally say enough is enough! Starbucks will need to determine just how large a customer segment it is that wants coffee delivery. I suspect they have plenty of loyal fans that would make this worthwhile although perhaps not at all locations.
Founder, Grey Space Matters
Starbucks has struggled and hasn’t innovated since MOPIS. It’s hard to see how this is going to make a material impact in its business but presumably their test was informative and a reason to make the investment. The quality and value proposition of a Nespresso machine versus Starbucks Coffee delivered, at least for me, is clear but like so many other things, the diversity of customer wants and needs makes a market, Beyond group orders, it’s hard to see the economics of this favorably given the costs and pricing around delivery.