How Starbucks Is Broadening and Deepening Customer Connections


Starbucks Roastery New York 2018 Ninth Avenue

Starbucks, the world’s largest coffee chain, this year grew to 23,132 stores in 65 countries and territories and expanded its offerings from just coffee to hot and cold drinks, whole-bean coffee, microground instant coffee, espresso, caffe latte, full-leaf teas, evolution fresh juices, pastries, and snacks.

Most stores also sell mugs and tumblers and beers, wines and appetizers, books, music, and film. Starbucks-brand coffee, ice cream, and bottled cold coffee drinks are sold at grocery stores. It’s been suggested that the highly visible, global brand has reached a saturation point in the US, with the average Starbucks location having 3.6 other Starbucks cafes within a one-mile radius.

But the company’s strategy is no longer to grow by adding new locations, but to grow its revenue per customer—and attract a new tier of customer—by adding premium products to its stores along with opening more premium Reserve locations and Roasteries.

Leading that charge—former CEO Howard Schultz, who’s now in charge of opening Roastery locations in the world’s major cities. Under his guidance, the company is planning 1,000 higher-end Reserve stores while adding Reserve bars to about 20% of its existing stores.

“Starbucks Roasteries under design or construction in the iconic, global cities of Shanghai, New York, Tokyo, Milan, and Chicago will join our Seattle Roastery in delivering an immersive, ultra-premium, coffee-forward experience like none other anywhere in the world,” said Schultz.

“Together, our Roasteries, Reserve stores and Reserve bars will broaden and deepen the enduring emotional connection that exists between our customers and the Starbucks brand everywhere.”

A recent investment of $1.3 billion in China gives Starbucks control of its 2,800 outlets there in a buy-out from a joint venture with two Taiwanese firms. The company plans to operate 5,000 locations in the country by 2021 and projects business in China to be more robust than its U.S. operations.

“Starbucks’ opportunity for growth in China is unparalleled,” said Starbucks CEO Kevin Johnson. “And we are just getting started.”

Shanghai alone is home to more than 600 stores, the first non-U.S. city to have a Starbucks Reserve Roastery along with 110 Starbucks stores with Reserve bars offering small-lot coffees. The company has opened an R&D center in China to develop food offerings compatible with local tastes, such as Chinese mooncakes and teas.

Johnson added on the company’s Q3 earnings call in July that “our growth strategy [will come] by strengthening our core, sharpening our focus, and increasing our efficiency.”

Back home in the US, Starbucks plans to open a massive location at 61 Ninth Avenue in New York City’s Meatpacking District in 2018 which will become the world’s largest Starbucks location—until it’s eclipsed a year later by the largest Roastery set to open in Chicago.

Starbucks and Ford have partnered with Sync 3.0 using Amazon’s Alexa service to tee up a Starbucks order and have it waiting for pick-up. In January Starbucks launched My Starbucks Barista, a voice-activated “barista” baked into the coffee chain’s existing iOS mobile app that uses AI with a planned rollout through the summer and an Android version to follow.

Starbucks already leads the pack in offering the largest mobile ecosystem of any retailer in the world with 13 million Starbucks Rewards members in the US and more than 27 percent of transactions occurring via mobile device. Starbucks Mobile Order & Pay currently accounts for more than 7 percent of transactions in US company-operated stores.

“We are in the business of human connection,” said Johnson, who took over the reigns from Schultz in April. “That is what we’re about—connecting with the human experience.”