Starbucks Leans on Digital With Pickup-Only Expansions

Need to Know 

• After announcing the closure of 400 cafes across the US and Canada, Starbucks plans to roll out more of its Pickup locations instead.
• Pickup stores cater to a digital-first clientele who can order ahead, pay, and earn points using Starbucks’ mobile app and loyalty program.
• The coffee chain plans for a mix of cafe-style and pickup-only shops, allowing for less crowding and easier social distancing.

Analysis

As part of an investment in digital integration, Starbucks is planning to restructure the format of its traditional cafes, opting instead to heavily feature pickup-only store concepts.

With the COVID-19 pandemic challenging the way all businesses operate, Starbucks is responding with a reimagined store concept. The coffee giant had been testing the Pickup store concept on a small scale earlier this year, and now in light of the pandemic, the brand plans to close 400 cafe-style shops in the US and Canada, looking to focus on drive-thru or walk-up locations. 

“One thing to know, even before COVID set into place, our business was roughly over 80% grab and go,” explained Starbucks COO Roz Brewer. “But we were [already] doing some other work … looking at the future of retail and work and trying to decide where are the best places to place our stores.”

Starbucks’ Pickup stores will rely heavily on technology, catering to those who order ahead and pay using the Starbucks mobile app. They will also continue their partnership with UberEats, offering easy delivery options for those who order with the UberEats app. 

By leaning heavily on the use of its mobile app, Starbucks is primed to capitalize on its rewards program: all thanks to the program’s 19.4 million rewards members, up from 16 million just a few months ago. 

Starbucks’ mobile app allows users to conveniently place an order ahead of time, pick it up, and pay for it—all the while earning points for every dollar spent. The points are then redeemable for free Starbucks coffee, food, and merchandise. 

By expanding the number of pickup locations available, Starbucks plans for a mix of both traditional cafe-style stores as well as pickup-only stores. This will allow for less crowding and facilitate easier social distancing. 

The coffee chain will roll out its next Pickup stores in New York, Chicago, Seattle and San Francisco.

“Starbucks stores have always been known as the ’third place,’ a welcoming place outside of our home and work where we connect over a cup of coffee,” said Starbucks CEO Kevin Johnson, in a statement. “As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers.”