1 Introduction to Starbucks' Retail Strategy
In the recent decades, coffee shops have gone from a primarily local selection with a few bigger names to an industry dominated by a superpower: Starbucks. Through careful planning and strategy, Starbucks has gone from a Seattle-based chain to a globally recognized brand. Not only has Starbucks grown itself, but they have simutaneously helped spark an interest in specialty coffees that was before just a niche interest. With a target market of millenials and younger Generation X'ers (Dudovskiy, 2017), Starbucks has had to learn to cater to everyone in this demographic. They've done so by not only offering both basic and specialty drinks, but expanding their business to including food, adapting to an online presence, and maintaining a close relationship with customers in a world where customer relations is becoming less and less common.
This paper will identify some of Starbucks' strategies that differentiate them from other retail superpowers. Starbucks has grown to its international status through (1) its emphasis on relationships with both consumers and their supply chain, (2) their adaptation to a omnichannel system with an unique digital presence, and (3) maintaining their brand message throughout the changing demands of their customers. Through these strategy implementaions, Starbucks has effectively become an example of a successful global retail strategist.
2 An Emphasis on Relationships
Before Starbucks became the coffee giant in the United States, local coffee shops were loved for their cozy, personal feel and the unique service that they offered – a personal relationship. Throughout their growth as a company, Starbucks has put in great efforts to maintain this ambience of personalization and a general care for their consumers. Often those who oppose Starbucks for its corporation status claim that smaller shops have a more intimate feel (Kortes, 2015), but Starbucks has introduced numerous measures to counteract this stereotype.
2.1 Customer Service
Starbucks has gone to great lengths to implement a customized customer experience. During their ascent from Seattle locale to over 24,000 retail stores (Starbucks Coffee International, n.d.), they have aimed to maintain the ambience of a ‘mom and pop' store. According to Gulati, Huffman, and Neilson (2002), “Keeping the customer's desires and expectations firmly in mind is a tactic characteristic of successful companies.” Starbucks has executed this through their continued use of specialized touches: writing each customer's name on their cup, having the barista live on video in the drive-through, offering a cozy and relaxed environment to work or socialize in. Each of these features helps the consumer feel less like just another customer and more like a respected patron of their unique store. Regular visitors are welcomed by baristas that remember their order, and newcomers are offered specialty coffees and recommendations by the well-informed staff. This creates a distinct atmosphere in each store and subsides any aura of a corporate franchise.
2.1.1 Mobile Application
Another tactic that Starbucks has utilized to enhance customer experience is the integration of their mobile application. This feature can be used to pre-order food and drink, store gift cards, and includes a rewards system. Users can earn ‘stars' to eventually receive free drinks and food, and can obtain a special ‘Gold” status that gains you further promotions and rewards. The app also lets users know about promotions and benefits, which helps create customer loyalty through returned patrons. This application has also been a major step in their digital integration, which will be discussed further in section 3.1 of this paper.
2.2 Supply Chain Relations
Another aspect of Starbucks' relationship focus is their interactions with their suppliers. Often, companies choose suppliers based on the lowest cost offered, and will switch suppliers if a better deal comes up. Starbucks defies this idea by choosing suppliers based on “first and foremost, quality; service is number two on [their] priority list, and cost is number three” (Gulati et al., 2002) These supplier qualifications differentiate Starbucks from retailers just looking for the best price, and ensures a longer-lasting partnership with their suppliers. Rather than switching suppliers frequently as costs change, Starbucks chooses the supplier with the best merchandise and service and creates a meaningful relationship with them. This scheme benefits both Starbucks and the supplier: Starbucks gets to understand the supply chain deeply and negotiate controlled prices, and the supplier becomes associated with the perceived high-quality of Starbucks (Gulati et al., 2002) A strong relationship between the supplier and Starbucks also benefits the customer, with consistent quality being offered in stores. By integrating strong connections in all aspects of their business, Starbucks yields positive results in all of their channels, thus solidifying their strong omnichannel presence.
3 An Omnichannel Presence
In the 21st century, offering a multichannel retail system has become more and more important as brick and mortar stores become less and less used. Wise and Leib define multichannel as “using more than one channel to sell and deliver merchandise and services to consumers” (2003, p. 67). Starbucks has taken this theory a step further by utilizing an omnichannel strategy, which is when a multichannel strategy is integrated so that each channel connects and is streamlined with all of the others.
This tactic allows customers to jump from channel to channel seamlessly and offers them the choice of which channel they prefer to use. For example, a customer can receive a Starbucks marketing email with a promotional offer, link this offer to their rewards account via the mobile application, and then redeem the offer in store. This streamlined experience keeps Starbucks up to date with the increasing digital presence needed for a 21st century retailer.
3.1 Digital Integration
A major factor of creating an omnichannel structure is utilizing digital platforms. Retailers have moved past catalogs and direct mail and onto mobile applications and social media to market their products. Starbucks has worked towards digitlal integration through the creation of their mobile application, which features online pre-orders, a rewards system, and an advanced payment system. Using this feature, customers can pay via giftcard or debit card by just scanning their phone at a register barcode. With many retailers now offering barcode payment through debit cards stored in phones, Starbucks joins this movement towards a digital purchase process and takes it a step further by offering payment through their own application. According to Brotman and Garner, two of Starbucks' executives, a major priority of Starbucks' in terms of digital expansion is “to be much more consumer- and store partner- focused” when developing new technology (2013, p. 2). This idea coincides with their principle of building relationships by creating new features specifically to help the consumer, rather than to just have a ton of innovative features for no clear reason. Starbucks also aims to be locally sensitive and globally aware when expanding digital aspects into their stores in other countries, according to Brotman and Garner (2013, pp. 4). This means considering that some countries won't be able to use digital payment or mobile apps, and finding a way to offer these locations digital solutions that fit their needs specifically. These considerations help Starbucks create a seamless omnichannel presence, which is a big factor in maintaining a clear and focused brand message.
4 A Focused Brand Message
Another important aspect of Starbuck's retail strategy is their consistent brand message. Each company has a message that they want their customers to receive and a percieved image that they want to display. For Starbucks, they have consistently focused on relationships, as discussed in section 2 of this paper. Their brand mission statement coincides with this perceived value: “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks Coffee, n.d.). This statement reinforces their personalized feel and comfortable atmosphere that they want each customer to experience when they visit the stores. One way that they have implemented this is through their store design.
4.1 Store Design
As Starbucks grew from a local Seatlle coffee shop to an international chain, they expidited the creation of new stores by having a central theme in all of the stores. Upon entering a Starbucks, consumers are generally met with a dim-lit, cozy store accented by green and brown colors that enhanced the ‘natural' feel of the stores (Aiello & Dickinson, 2014, p. 306). While this definitely created a cohesive image across all stores, this design lacked any personalization to the area it was built in. To combat this ubiquitous aura, in 2009 Starbucks announced a “new global store design strategy, aimed at setting the stage for a reinvigorated customer experience” (Aiello & Dickinson, 2014, p. 306). This renovated strategy intended to not only maintain the Starbucks' experience, but also incorporated some local influences on each store to best fit that location. This duel-purpose design accomplished its need to appear as a Starbucks' location and its need to express local culture and neighborhood characteristics. One of these new design features is the creation of Starbucks Reserves, high-end coffee-tasting bistros that are placed in wealthy urban cities. This attention to the locale that will be visiting the store helps better fit the needs of the consumers.
A Starbucks Reserve in Dallas, Texas. Photo via The Dallas Observer.
4.2 Deep Assortment
To further expand upon their brand message, Starbucks has incorporated a deep assortment of specialty coffees on their menu. Having such a large target audience, Starbucks has to have options for people with a variety of tastes. They offer in store selections of prepackaged coffee grounds, iced coffees, a number of different roasted flavored coffees, and even a variety of foods. This allows store patrons to be able to choose something that caters directly to them, whether it be a simple Pike Place roast or a specialized Java Chip Frappecino with extra whipped cream. Everyone can find something they like to drink in Starbucks, even those who don't drink coffee, with Starbucks' assortment of Teavana teas. Beyond their stores, Starbucks also sells prepackaged coffee grounds in grocery stores, so that consumers can have Starbucks' coffee in their own home. This plethora of options for the customers enhances their brand message of personalization and specific relationships. Every customer can have their own unique drink, in their own unique way.
5 A Global Strategist
These strategies discussed above are just a few of the key ways that Starbucks has grown into an international brand. Using these strategies, Starbucks has expanded into 75 markets across the globe (Starbucks Coffee International, n.d.). For each of these new markets, Starbucks has had to consider the relationships that they want to form with those consumers, how media channels are used in those locations, and the way they want to display their brand message while incorporating local culture. One of the ways that Starbucks successfully expanded was its introduction into China in the late 20th century. “Starbucks quickly recognized that there were different cultures within China,” and made a it a focus of theirs to adapt to the needs of the region (Wise, & Leib, 2013, p. 591). They used local products to create unique merchandise for the region and partnered with regional businesses to open new locations. By taking these careful steps when globally expanding, Starbucks successfully entered the new market and strategically met customers' needs.
6 Final Analysis
As a competitor in the coffee industry, Starbucks has dominated through the implementation of these retail strategies. Competition such as Dunkin' Donuts offer lowere prices but with a much lesser assortment. Dunkin' Donuts also lacks unique store designs, and they have an inconsistent brand message with their quest to sell coffee yet being named as a donut shop. Other competitors such as McDonald's also offer much less of a personal experience and a high-end atmosphere. Within their target market and demographic, Starbucks has been the most successful in selling specialty coffee.
Although they have quite successfully transformed coffee retailing in the past two decades, there are a few more tactics that Starbucks could implement to better reach their target market. Although they have prices attainable for the older section of their demographic target, some younger consumers may find their prices a bit steep. One strategy they could use to combat this would be to offer a student discount or membership, which would encourage college students to patronize Starbucks with the promise of promotions excluisive to them. Since they already target college students (Dudovskiy, 2017) and have an atmosphere ideal for studying, this promotion especially for them would further encourage them to choose Starbucks as their coffee destination.
Another way that Starbucks' could expand within their target market is offering exclusive drinks from other region's as limited time offers. In each of Starbucks 75 markets, they have specialized drinks for each region. If Starbucks in the US offered a selection of drinks from Chinese Starbucks during Chinese New Year, this could increase interest in the brand among the American-Chinese demographic. This tactic could have endless executions, with limited-time offers a few times per year with varying geographic focuses. This could help increase Starbucks' reach into people of various cultures.
Overall, Starbucks has very efficiently integrated itself into the global retail industry. Through their purposeful use of retailing tactics, they have gone from a local shop to an international corporation in just 25 years. Starbucks has created meaningful relationships with both customers and suppliers that increases loyalty within both groups. They have correlated all of their marketing channels and introduced a digital aspect to create an omnichannel presence. They follow their brand message and mission through careful use of store design and assortment, along with a distinct customer experience. Each of these tactics are interconnected to create an one-of-a-kind expereince for Starbucks' customers, both locally and globally.
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