THINK TankNovember 14, 2019

Is Starbucks Mobile Pickup the Next Big Thing?

Nicole Leinbach Reyhle and Ricardo Belmar Weigh in

The Breakdown: Your morning coffee run may soon become a coffee sprint. Last week, Starbucks opened its first Mobile Pickup store in New York City’s Penn Plaza.

Designed for the New Yorker on-the-go, the iconic coffee chain cut ribbons at the 1st Starbucks Pickup Store in Penn Plaza last week.

The cashier-less location serves as a pickup hub for customers who pre-order their favorite beverages and cafe items using the Starbucks mobile app.

Upon arrival, customers can track the progress of their order via a digital status board and retrieve their items from a Starbucks barista once ready.

The new Midtown concept is based off “Starbucks Now,” a similar store format in China that has become widely popular in recent years.

Q: What do you think of Starbucks Mobile Pick Up and do you expect we’ll see more of these pickup-only locations popping up in the U.S. and abroad?

 


 

The Weigh In: Nicole Leinbach Reyhle and Ricardo Belmar

Ricardo Belmar: I think this is an inevitable extension of Starbucks’ own successful mobile ordering program as a whole. For many people, the Starbucks app, mobile ordering through it is probably their first experience with mobile wallets, mobile payments, or just ordering ahead through mobile in general. I think this really reflects this ultimate view of convenience. It’s not as if Starbucks is lacking for cafe locations throughout Manhattan. So the fact that they’re adding this, and I think it’s particularly noteworthy that it’s in the Penn Plaza location, because I know there are a couple of other Starbucks not too far away from this spot. It really speaks to how they’re trying to better serve customers in these densely populated urban areas like Midtown Manhattan, especially based on the volume of mobile orders that they’re receiving.

 

Ricardo Belmar: Just about everyone I know has had at least one experience at a Starbucks where they mobile ordered ahead and it just wasn’t the best experience once they got to the Starbucks restaurant. Either they were delayed, there were so many orders that the baristas were backed up. So I think trying to dedicate a space with a pickup only like location like this really helps Starbucks address a big segment of its customer base: the Grab and go, on the run customer who likely orders their coffee ahead in the app and just wants to grab it on the way to work in the morning or on their way to a meeting in the city somewhere.

It’s not the same customer that would go to a Starbucks, sit down, open up their laptop and then start working there for an hour or two, maybe have a meeting with a client during that time. Myself and many people I know have made use of plenty of Starbucks locations for just that kind of a purpose. That’s not what this location obviously is for, this is that grab and go type of customer.

 

Ricardo Belmar: I think there are many Starbucks customers who, depending on what’s going on in their day, they could be both of those types of customers. They might be the one that sits down at Starbucks and spends some time there, they may be in a rush to get somewhere, but they really need that coffee to pick them up, and it’s a good centralized location for that. So, in a way, it’s a different customer profile, but sometimes, again, the same customer. I think it just makes sense as an extension of that overall experience. There’s a broader trend I think we’re seeing here throughout retail segments, where one brand is going to develop multiple store formats, where each format is built to address a specific need of their customer base.

 

Ricardo Belmar: It’s not limited just to restaurants or coffee shops like this. We could compare to Nordstrom, for example, with their very elaborate and well received new flagships in New York versus their main line department store, mall locations or compared to their Nordstrom Local concept. So I think this is just something we’re going to continue to see throughout retail segments where there’s no one format fits all for their customers and Starbucks is smart to try to cater to different customer types and expand those locations of this type. I would not be surprised that after some amount of time, while they monitor the success of this location, we’ll see them open up more. Wouldn’t surprise me to see them open up additional ones in New York or to find other cities with a similar profile where they can benefit from this pickup only type of location.

 

Nicole Leinbach Reyhle: I absolutely agree with a lot of what Ricardo said and just expanding on that, I think that because it is a tech-based model, it’s dependent upon that digital connectivity between the customer and the actual retail pickup spot for their Starbucks order. I think it really enhances customer service because as Ricardo pointed out, if you do that pickup in a traditional store, it’s often either backed up or it’s not as easy to navigate once you’re within the store space because it’s overwhelmed with customers who might be leisurely sitting there or whatnot. So I really think that Starbucks is going to benefit from this model.

 

Nicole Leinbach Reyhle: It allows them to be nimble enough to open up more stores quickly to in places that would be responsive to this type of model as well and I don’t think they’re going to undercut customer service. I think instead they’ll enhance it because they’re giving the customers that want a quick grab and go experience and opportunity to do that and it’s robust and it’s exciting and it’s on demand, and I think that’s what a lot of customers are essentially pushing Starbucks to do in response to not only Luckin, which is the Asian-based retailer we were talking about in comparison earlier, but also just in response to general lifestyle that we’re seeing.


Nicole Leinbach Reyhle: Now granted, Starbucks was the original trend setter when it came to making coffee, not just coffee. Right? So there’s something to be said for that, but the strategy is clear. Customers want quick, on-demand, easy accessible tech-based beverages, right, and they want it at convenience and so it can be positioned within convenience locations. So Starbucks and Luckin in China are very, very close to each other. Less than half a mile away when I was researching. They’re in tier one, tier two cities, are tactically neighbors within communities, right? So I don’t think Starbucks will necessarily thrive, but I think they’ll stay very competitive to Luckin there.

 

Ricardo Belmar: I think one thing I’d add to that, because it is a good point, it’s something Nicole said earlier about it being a tech-based experience. Some parts of the world and maybe this is something that would help them in China with this format, there’s consumers who like and seek out that more tech-based experience for this and especially when it’s delivering a convenience factor. So I do think if Starbucks is really good at the execution of this tech-based experience at this location, then I think that would tell us something about how much they’ll expand in other places. I think this format, at least in my mind, should give them an easier path to expand. So if expansion is their goal, that is the success of this format, it’s probably going to be telling as to how quickly they ramp up.

 

Ricardo Belmar: When you have this kind of tech-based experience it’s very much based on signage to provide customers with updates and status on orders, and you don’t normally think of a lot of digital signage at many Starbucks locations. So if you get there ahead of when it’s ready, you can see at a glance how long it’s going to take for you to get your coffee. So little things like that and the execution and their ability to quickly process the data from the mobile order — all of those thing are going to be what makes or breaks the success of this format. And if it works well, I think that’s going to tell us a lot about how quickly they may ramp it up in other areas, especially in places like China where you expect to be seeing a better reception to those tech-based experiences.

 

This conversation first appeared on the Nov. 11 episode of the Retail Rundown.