Starbucks has revealed a significant acceleration in the company’s digital technology investments aimed at enhancing operational efficiency and improving customer experience. The rollout of digital storyboards, initially planned for completion in three years, is now targeted to be deployed across most U.S. stores within the next two years.
Starbucks chief technology officer CTO Deb Hall Lefevre leads the coffee chain’s tech function with the mission of ensuring stores run smoothly, while delivering winning digital partner and customer experiences.
Enhancing the Cafe Experience
Starbucks is not only focusing on technology but also on enhancing the physical cafe experience. This includes introducing new and expanded seating options to create a more inviting environment for both partners (employees) and customers. These initiatives have led to a notable reduction in partner turnover rates and a 13 percent improvement in average hours per partner, the highest on record. The precision partner-centric staffing and scheduling efforts have also resulted in the best shift completion rate in two years.
Starbucks Rewards loyalty program 90-day active members in the U.S. totaled 33.8 million, up 7 percent year-over-year.
Starbucks reported revenues of $9.1 billion (down 1 percent), operating expenses of $7.67 billion (+0.2 percent), Operating income of $1.517 billion (down 4.2 percent) during April-June 2024.
Strengthening of technology and scale digital is a top priority for Starbucks in order to unlock efficiency and business growth. “Our innovation and execution enhance our capabilities, while helping return the business to sustainable growth,” Starbucks CEO Laxman Narasimhan said while announcing the financial result for April-June.
Supply Chain and Productivity Improvements
Starbucks is realizing significant efficiencies, cost savings, and performance improvements across its end-to-end supply chain. The company is ahead of its productivity plan, unlocking capital from non-customer-facing areas to reinvest in value-driving initiatives for customers. This productivity drive is expected to reignite Starbucks’ North America growth.
At Starbucks, Kelly Bengston (senior vice president for Starbucks Supply Chain Operations, Global Supply Chain) is responsible for implementing strategies and initiatives to enhance the efficiency, sustainability and quality of supply chain, ensuring timely delivery of products to stores with varying channels and formats.
In June, Starbucks announced a partnership with Grubhub, rolling out Starbucks Delivery with Grubhub in select U.S. markets, with the goal of national availability in all 50 states by August 2024. Offering customers the convenience of ordering from Starbucks through three leading delivery platforms, Starbucks Delivery is expected to approach $1 billion in U.S. revenue this fiscal year, doubling in two years.
Product Innovation and Marketing Success
Starbucks continues to drive demand through product innovation and integrated marketing campaigns. Notable successes include the newly formulated iced coffee and the launch of Starbucks Milano Duetto whole bean coffee in Milan. The introduction of Summer-Berry Starbucks Refreshers with Pearls achieved the highest Week 1 product launch in the company’s history. An expanded relationship with Gopuff will see 100 delivery-only kitchens opened across the U.S.
At Starbucks, Kyndra Russell (senior vice president, North America Chief Marketing Officer) is responsible for leading the Starbucks Marketing organization including brand, product, loyalty, partnerships and licensed store marketing as well as marketing operations for creative production, publishing, development and digital transformation.
Digital Enhancements and Mobile Ordering
Significant improvements have been made to the Starbucks app, including wait time algorithm enhancements that improved order-ready accuracy by nearly 50 percentage points. These enhancements contributed to a 10 percent year-over-year growth in Mobile Order & Pay (MOP) revenue and a 7 percent increase in MOP transactions. Starbucks has also opened MOP for all customers, addressing the demand for mobile ordering without the need to join a rewards program.
Operational Excellence and Siren Craft Systems
The introduction of Siren Craft Systems has led to material improvements in U.S. store operations, including a reduction in wait times and increased throughput. The deployment of these systems across the U.S. company-operated stores has shown promising results, with an expected 10- to 20-second reduction in wait times. The company plans to further enhance efficiency with refits to espresso machines and production systems.
At Starbucks, Elizabeth Hunter (senior vice president of Starbucks Partner Technology) is responsible for the delivery and operations of technology supporting the partner (employee) experience across retail, plant, warehouse and support functions.
Future Growth and Expansion
Starbucks plans to accelerate new store builds and renovations, with 580 new builds and over 800 renovations planned in North America for FY 2024. Focused on Tier 2 and Tier 3 cities, these developments will incorporate Siren system equipment to enhance customer experience and operational efficiency.
In summary, Starbucks is committed to leveraging digital technology to drive efficiency, improve partner and customer experiences, and sustain growth. These initiatives, along with continued product innovation and strategic supply chain improvements, position the company for a promising future.
Baburajan Kizhakedath
