Coffee chain finds new channel to gain back customers
Curbside is the talk of many restaurant operators today as consumers have embraced the channel, and now Starbucks Coffee has made it pivotal to its sales recovery plan. Indeed, experts say that consumers are looking for safety and convenience as they navigate the pandemic.
A third-quarter 2020 analyst call shed more light on curbside, takeout and Starbucks’ digital efforts. While comparable sales in 3Q in the Americas and US were down 41 and 40 percent, respectively, the coffee chain regained its footing. As the quarter came to a close, slightly-negative comp sales turned positive as July month-to-date comp sales currently reflect a 2-percent increase domestically, according to Kevin Johnson, president and chief executive of Starbucks.
Recovery in the United States, where Starbucks lost 52 of its transactions compared to last year, is key to a full comeback. Faring prominently is curbside activation, which Starbucks plans to grow from a test of 250 units to as many as 1,000 in its fiscal third quarter. The health of Starbucks’ financials will hinge on the chain’s ability to capture more pandemic-cautious customers, particularly as the morning daypart continues to struggle.
Rewards growth, real estate transformation can provide lift
New, incremental reward members also make up a pivotal part of the recovery plan. During 3Q, reward members increased by 3M, a 17-percent increase from the previous quarter. Furthermore, Starbucks Reward member purchases as a share of tender increased by 4-percentage points from last year to 46 percent. Mobile ordering had increased to 22 percent of total sales mix. And ninety-percent of all transactions flowed between drive-thru and mobile order & pay.
Average check is up 27 and 25 percent, respectively, in the Americas and the United States. What executives have noticed is that there are more group and family orders. Customers may also be buying for multiple purchase occasions when they come into the store, pushing the check higher. The Seattle-based coffee giant will also add Impulse merchandise, including serveware and mugs, to the app.Starbucks also grew its category share of household coffee and plans to expand e-commerce efforts to capture more potential business.
Starbucks curbside provides incremental opportunity
“The interesting thing about curbside for us is that it is tech-enabled, so you can access a curbside from the app where it is available currently,’ said Roz Brewer, Starbucks chief operating officer and group president, Americas, responding to analysts’ questions. “And so we’re continuing to roll that out. And so we expect to continue to see what we saw in that 250 store test trial that we’ve been running just prior to COVID.”
This next quarter will see the chain expand its Pickup Store format by 50 units, which is central to its urban strategy. Order-ahead only Pickup Stores, which are typically located three to five minus from a traditional Starbucks store, should spur sales and address a convenience-focused clientele. In the suburbs, expanding the number of stores that can accommodate curbside will be critical. In addition, to increase throughput across formats, Starbucks will deploy handheld devices to expedite ordering and pickup in stores where the queue can obstruct flow.
Brewer added, “So between handheld and curbside, we feel like we’re going to be able to deliver a different customer service and it will unlock and enable some efficiencies that we need, and speed. And so we’re looking at those two as key drivers.”
The research for this article utilized audio from Starbucks’ 3Q earnings conference call, an accompanying earnings release and transcripts from Seeking Alpha.
Photo credit: Starbucks Coffee
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