Starbucks Continues Digital-First Drive into Personalization, Loyalty-Building, and Global Expansion
Starbucks reaffirmed its commitment to its five-step reinvention plan, announced last Fall, with a renewed focus on building out digital capabilities, deepening loyalty, boosting personalization, and bolstering its supply chain with investment in machine learning and artificial intelligence.
In a recent earnings call with investors, CEO Laxman Narasimhan gave a glimpse into the latest progress and how Starbucks is continuing to strategize for further global expansion and innovation amidst ongoing economic uncertainty.
The topic of China came up time and again over the course of the conversation, with sales at Chinese locations open at least 13 months leaping 46% year-over-year following post-COVID store re-openings, the company said. Starbucks has prioritized creating a strong digital foundation and enhanced tech capabilities to underpin this fierce sales rebound.
[Also read: Target Rolls Out Drive Up Starbucks Option at Select Stores]
Starbucks Five Step Reinvention Plan
- Creating a unified global company
- Radically improving the in-store partner experience
- Reimagining the store operating model
- Reinvention around what customer connection means
- Redesigning the construct of what it means to be a partner at Starbucks
However, these innovations were not limited to China. Narasimhan explained that the company is leveraging its internal Deep Brew platform to lead the advancement of artificial intelligence and machine learning capabilities across a diverse array of functions and operations.
On the call, the leader detailed how the company has leveraged such intelligent solutions to improve pricing and bolster revenue growth management, building on progress already achieved in handling product mix, size management, and managing customization.
Elsewhere, Starbucks is driving greater efforts into personalization through mobile app usage and rewards programs, implementing exclusive pickup lanes for mobile orders and enhanced timing algorithms to provide precise wait-time estimates for online orders.
“We [also] plan to move all stores to brand-forward digital menu boards over the next couple of years to sharpen personalization and daypart activation further,” Narasimhan shared.
Workforce Wins
In an industry beset by high turnover, Starbucks’ bucked the trends, with barista attrition improving by 11% year over year, the company said.
Starbucks leaders chalked this improvement up to a number of factors, including faster, easier-to-use equipment and portable, handheld blenders allowing associates to keep up with summer demand for frozen drinks.
[Also Read: First Look: Starbucks' Immersive New York Reserve Store]
“Through scheduling and staffing improvements, we are beginning to increase the number of hours per partner in store, critical to running great stores and improving partner engagement while also improving productivity,” Narasimhan shared.
Loyalty Provides an Economic Leg Up
Starbucks' investment in rewards and loyalty programs has been a priority for some time – and the bet is paying off. According to the company, 90-day active Starbucks Rewards customers expanded to 75 million globally in the third quarter of the year, growing more than 25%.
“This was driven by a record 90-day active user base of 31.4 million Starbucks Rewards customers in the U.S., an approximate 15% growth or 4 million new customers from the previous year. Starbucks Rewards members in the U.S. drove 57% of tender for the second consecutive quarter, up over 3 percentage points from the prior year,” Narasimhan detailed.
Supply Chain Strides
Starbucks has broadened the initial reinvention plan to include supply chain and procurement and recently appointed Arthur Valdez, Jr, as chief supply chain officer to drive its logistics and fulfillment efforts further.
A key part of these efforts includes the opening of a new Coffee Innovation Park in the fall – the company’s largest and most sustainable manufacturing investment outside of the U.S. “This next-generation facility with state-of-the-art supply chain operations will also include a unique customer immersion center,” said Narasimhan
Unveiled in 2022, Starbucks’ Five-Step Reinvention Plan seeks to "touch and elevate" the end-to-end Starbucks experience, encompassing everything from workforce investments to equipment upgrades, to reimagined store models.
Loyalty has been a particular area of focus for the company, with the plan including updates to the Starbucks Rewards redemption tiers, as well as the launch of Starbucks Rewards Odyssey in beta to select members on December 8, 2022.
This new project integrated NFTs with Starbucks’ loyalty program to create an interactive Web3 community, according to the company, while also allowing members to earn and buy digital collectible stamps (NFTs) that unlock access to different coffee experiences.
