Starbucks is dusting off an idea it had before the pandemic: Delivery-only locations.
The Seattle-based coffee giant, which has seen delivery demand increase this year even as many other chains see weakness there, is considering a wider range of store types as it works to adapt its real estate strategy to better meet customers’ needs.
“When we think about our opportunity in the future, it’s how we leverage our portfolio to unlock capacity, but in a way that best meets the customer needs and demands,” CFO Rachel Ruggeri told investors on Tuesday at the TD Cowen Future of the Consumer Conference, according to a transcript on the financial services site Sentieo/AlphaSense. “So that’s going to be different versions of drive-thru stores. It’s going to be delivery-only stores as well as different versions of pickup stores.”
In the U.S., Starbucks operates 9,300 corporate stores and licenses another 6,600 in places like hospitals and supermarkets. Of those corporate locations, 70% have a drive-thru. That, according to Ruggeri, generates the highest return for the chain, as anyone who has seen a drive-thru line at one of its shops at 8 a.m. can attest.
Twenty-nine percent of its corporate locations are its traditional cafes without a drive-thru. And 1% are pickup-only locations the company began opening in urban areas in recent years that give mobile-order customers a place to grab their beverages.
But the company is considering a broader set of options, Ruggeri said. Starbucks believes that stores targeted at specific customers may be friendlier both for customers and for employees, a key point given the challenges Starbucks faced last year with a growing unionization effort.
“You can go to a store that has all the channels, that has a drive-thru, that has [mobile order], it has delivery, it has an in-store experience,” she said. “That can be complex. And it sometimes doesn’t create the best experience for a customer, and it’s certainly challenging for partners.”
Delivery-only locations in theory could help with that. Starbucks has been getting more business from third-party delivery of late, executives said. And that could be enough to warrant such concepts that only target those customers.
That could also address another issue that takes place inside the stores, when delivery orders create complexity for employees and slow business for in-store, mobile order or drive-thru customers.
“We see a path towards that in the future as delivery is becoming a more and more meaningful part of our business,” Ruggeri said. “And so we look at delivery-only as a way to take the complexity out of the existing stores. And it creates a better experience for both the [employee] and the customer.”
Delivery-only locations have been on chains' radar for years as the service has grown, with some mixed results. And Starbucks broached the idea back in 2019, before the pandemic. But delivery is a bigger option these days, and the company has also faced those notable challenges with complexity.
Ruggeri also suggested other options, such as a drive-thru-only location with a mobile order lane to boot. “That’s for a highly virtual type of customer,” she said. “It may not be right for a customer like me who likes to walk into the store. But it’s a way to use the store design to elevate for the experience for the customer and taking into account what it means for the partner.”
So, expect different types of Starbucks locations in the future.
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