Starbucks developing new store dedicated to pickup and delivery orders

Photo: Starbucks
Sep 06, 2019

Customers at Starbucks can order their drinks with a wide variety of ingredients. This attention to detail has helped the coffee giant stand out in a fast-food world. It has also led to long lines in the chain’s stores and at its drive-throughs as customers queue up to receive their orders.

In recent years, Starbucks added online ordering with in-store pickup and home delivery to try to manage its line problem.

Starbucks CFO Patrick Grismer told attendees at the Goldman Sachs Global Retailing Conference this week that mobile order and pay has been a success for the chain, but one that has tested the chain’s capacity to serve its customers.

“I suppose it’s a high-quality growth problem to have in retail where there’s latent demand and the opportunity for us is to unlock the capacity so that we can accommodate all of that demand,” said Mr. Grismer (via Seeking Alpha).

Home delivery, however, has been slower to catch on with Starbucks customers. 

“We are now in a handful of markets in the U.S. [We] expect through our partnership with Uber Eats to reach national coverage by the early part of 2020. But I would say that our expectations are that the business would grow over time,” he said. 

“We know that convenience is an important need state for customers generally and we’ve found that for Starbucks specifically that convenience is very highly valued. So, we believe that over time a delivered beverage will be more commonplace, if you will, in the U.S and that we would see higher levels of acceptance,” Mr. Grismer added.

One possible solution to Starbucks’ capacity issue may be currently in development at a store in Manhattan. In an interview with Bloomberg, Starbucks CEO Kevin Johnson said the store will only handle pickup and delivery orders.

Inspiration for the New York City location comes from China where the coffee giant operates Starbucks Now locations that serve as express pickup locations for customers placing orders on their mobile devices. 

The new store will not be the first time that Starbucks has tinkered with a pickup-only location in the U.S. In 2017. The chain tested a similar concept at its headquarters in Seattle.  

DISCUSSION QUESTIONS: How important a feature will mobile order and in-store pickup become for foodservice operators over the next decade? Do you see a format that only handles pickup and delivery orders as being transformative for Starbucks’ business in the U.S.?

Please practice The RetailWire Golden Rule when submitting your comments.
"Starbucks has a problem every retailer wants - excess demand."
"One caveat, though: Pickup only locations should always be walking distance from a traditional Starbucks."
"Rather than opening standalone mobile pickup destinations, they should try to reformat to add additional capacity and customer flow for the mobile orders."

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16 Comments on "Starbucks developing new store dedicated to pickup and delivery orders"

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Neil Saunders

Going to Starbucks in big cities and busy locations has, over time, become more frustrating. Service is slower, partly thanks to those stores trying to cope with more digital orders, but also because of dithery people who agonize at the register over what type of non-milk milk they want and whether flavor shots contain some obscure chemical that might go against their latest diet-fad, and then spend three minutes fumbling to find their payment card. Because of this, a store that is focused on collection only makes sense – if it works efficiently. In theory people should be able to place an order, secure a time for collection, walk in, get their product and get out quickly.

That said, this will not work in all locations as the sales densities won’t support it. I also don’t think home delivery will be all that big for Starbucks. Office delivery, maybe; home delivery, no.

Art Suriano
Interesting idea but I see more negatives than positives. I like the pickup and delivery concept, although delivery on such a small order will have to be expensive. The downside though is that rent is not cheap, and I don’t care how well you market something, there will always be customers who see Starbucks and want to come in to make a purchase. Do they want to take the time to order on their mobile phone? Maybe, but many of them will want to order at the counter. I am not a big Starbucks customer, and perhaps the loyal Starbucks customers will sign on and support the concept. The loyal Starbucks customers are already shelling out several dollars for a coffee, just the way they like it so perhaps they’ll be willing to pay the delivery charge, whatever it is, as well as support Starbucks stores offering only pickup and delivery. Time will tell but, with so much competition out there, it might prove to be more costly to Starbucks than they the realize.
Bob Amster

Digital ordering for in-store pick-up has its “cool” factor but is not a must. As Neil Saunders points out, it will not work in every location. We have heard this song before; all locations are not created equal and, even though it is the same unattractive coffee, these nuances will have their place and their value in some places.

David Naumann
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
2 years 8 months ago

Starbucks has a problem every retailer wants – excess demand. In targeted urban markets, this concept may be the answer. I can’t imagine more stores in NYC, as some are only a block apart. As more consumers get in the habit of ordering more things online (which is very common for Starbucks), we will see more small footprint locations dedicated to servicing pickup and delivery orders.

Michael La Kier

For Starbucks, which built its business on the idea of becoming a “third place” (outside your home and office), this shift is a (sad) significant one. But one that is becoming ever more a reality as we lead faster-than-ever lives. We want what we want when we want it; foodservice operators able to deliver that will win in today’s economy.

Lisa Goller

Starbucks’ relaxing “third place” oasis has adapted to act more like a drive-thru.

Across retail categories, consumers now expect speed, convenience and a hassle-free experience. Our increasingly mobile mindset means many people simply want to grab their coffee and go – fast – so testing this format makes sense.

If Starbucks can successfully manage its processes to keep the coffees hot, it will deepen consumer trust, sales and loyalty among busy consumers by offering this new format.

Gene Detroyer

At my Starbucks (in NYC) mobile order and pickup generates a constant stream of traffic. Sometimes it appears to get in the way of the in-store orders and vice-versa. Observing what goes on, it would make sense to separate the two operations, either in a small store close by or a separate part of the store.

But delivery? While I would never order my coffee to be delivered, it is not uncommon from DD, the local bagel place or diner. Unless it’s iced coffee though, it doesn’t make sense if it is farther than a walk away.

Steve Montgomery

While admittedly not a fan of their coffee, I admire Starbucks’ retail acumen. They recognized that not only would people wait in line behind customers who, as Neil pointed out, had to use a dozen adjectives to describe their drink, but would also do so in a drive-thru line.

This new store is a great extension of the digital order and pickup process in one of their regular locations. I also agree with Neil’s observation that this will only work where you have enough population density.

Ian Percy

Let’s see what happens the first time someone has to stop suddenly coming out of the drive-thru and dumps the hot coffee in their lap. In Googling what happened to that famous McDonald’s case I typed “Woman sues” and up it came. That was in 1992 and it is still talked about! She was awarded $3 million and got $640,000. Starbucks has already lost one “hot coffee” lawsuit for $100,000.

Ken Morris

While I believe mobile ordering and pickup is important I think a mobile coffee/food truck approach is a much better way to reduce cost, assure quality and get to the next level of in-home delivery which is the way this will go. The idea popularized in the ’90s by Chemex in Mexico where they had mobile cement trucks without existing orders being routed by online demand is a model to be used here. The future is in-home delivery, why not just do it?

Brian Cluster

Starbucks in many ways has been leading digital transformation and innovation at retail since the launch of their mobile payment program more than eight years ago. For Starbucks, mobile ordering will likely become more important in the high-traffic and high-density areas but may never really become the predominant service method for all stores.

Despite our busy lives, Starbucks has been for years been the third place for many customers. I think that they will continue to focus and improve on that place where you have all of the comforts of home and/or your office.

Foodservice operators should continue to learn and monitor what Starbucks is doing as they are among the best at experimenting and innovating and pushing boundaries in retail.

Lauren Goldberg

Rather than opening standalone mobile pickup destinations, they should try to reformat to add additional capacity and customer flow for the mobile orders. I envision a horrible experience when customers go into a new pickup location and want to order a drink.

Jasmine Glasheen

Pickup only is great and I imagine we will see more of this in the near future. One caveat, though: Pickup only locations should always be walking distance from a traditional Starbucks. If not, I see customers without access to a smartphone or the Starbucks app becoming very disgruntled when they walk in and can’t place a traditional order, and it could deepen the generational divide between the Silent Generation/customers without access to technology and the trending coffee chain. To create a positive experience for all customers, Starbucks has to remain cognizant of the fact that some still prefer to do things the old-fashioned way.

Cynthia Holcomb

Starbucks will need to let its customers know the difference between stores and pickup locations. As a customer myself, I would be bummed to walk into a Starbucks to find out I cannot order a drink in person. Only to be directed to go outside and get on my phone to order the drink and then continue to wait outside to be notified my drink is ready. Sound bizarre? Each Starbucks customer experience is subjective to the individual. Unintended consequences abound.

Lee Peterson

Great idea. The proliferation of “ghost kitchens” is definitely on the rise, matching or catching up to the consumer desire for delivery. In the end, the consumer is the disruptor so, if you want to stay in business, or not give half of yours away, this idea will have to be adopted.

Sterling Hawkins

The experimentation here is what’s important. There’s a general acknowledgment that things are changing and Starbucks is out in front creating what that change might look like for them and their customers. I don’t think there’s a single answer for all retailers/foodservice operators regarding pickup/delivery, but there are a variety of new things that might work depending on the operator, region and customer base.

"Starbucks has a problem every retailer wants - excess demand."
"One caveat, though: Pickup only locations should always be walking distance from a traditional Starbucks."
"Rather than opening standalone mobile pickup destinations, they should try to reformat to add additional capacity and customer flow for the mobile orders."

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