THE STARBUCKS SECRET TO REJUVENATING RETAIL

A SERVICE LESSON FOR RETAILERS, FRANCHISEES AND ENTREPRENEURS

With the internet gutting many product-driven retail formats, is there still a place for retail store growth? Or will most shopping and consumption end up on a UPS truck?

Let’s look at how one excellent retailer has tackled this problem and what we can take away from it.

Starbucks in Motion

A quick look at Starbucks shows how a truly traditional retail concept – coffee – came alive and continues to prosper by staying focused on service principles and using the internet to enhance them. When it comes to traditional products, it doesn’t get much older, duller or more ubiquitous than coffee, yet Starbucks continues to thrive.

A sharp focus on convenience, speed and the strategic importance of location and product innovation became the hallmarks of Starbucks’ strategy and can be lessons for all entrepreneurs, franchisees and other large multi-unit retailers trying to survive in today’s retail climate.

Starbucks Snapshot The most critical success elements of Starbucks translate into speed and convenience.* These elements, along with a consistent, high-quality product and constant innovation, help Starbucks engage the consumer and make sure his or her convenience needs are met.

A STRATEGICALLY SOUND STORE FOOTPRINT WITH THE BEST SITES FIRST

Starbucks reached a zenith with over 500 store openings per year, or one every 18 hours, in key strategic locations that had high traffic and were convenient. It simply laid down its network better and faster than others initially, creating an enduring competitive advantage of convenient locations.**

LESSON: Sound, strategic real estate planning is critical and often where entrepreneurs fall short.

BY JOHN B. RICHARDS

THE STARBUCKS LESSON IS A POWERFUL ONE.

IT REJUVENATED A MATURE CONCEPT, MADE IT

INTERESTING AND IMPROVED ITS BUSINESS

SYSTEMS BY EMBRACING THE WEB.

A FOCUS ON TRANSACTION SPEED

Early on, the company recognized that convenience drove its business – no matter how attractive its coffee offering, there was a limit to how far people would go for it. It started with location but prospered with efficiency and service speed. A myriad of store design features improved service, such as the Starbucks Card that initially made swiping easier and faster over cash-cutting initial transaction time. Later, it became a loyalty vehicle tied to online ordering, which allowed consumers to skip the line altogether. Because the company started with a high dependence on the morning daypart (6 to 9 am), it first had to squeeze every transaction out of that time period. This created a culture in which every customer transaction counted.

LESSON: It is hard to argue that quick and efficient service is bad for any business given today’s time-starved lifestyles.

FOCUS ON USE OF THE WEB TO IMPROVE SERVICE AND CREATE LOYALTY AND ONGOING ENGAGEMENT

Unlike most retail businesses that came reluctantly to the web, Starbucks embraced it early on (though perhaps recklessly at first, some might argue). They eventually evolved a loyalty program that rewarded patronage and improved service by adding on-line ordering, among other connections of interest to its patrons. Starbucks has used the web to build and shore up its advantage, unlike other retailers who are often threatened by it. Even as coffee concepts and offerings have improved elsewhere, Starbucks’ business has continued to grow. Because Starbucks was quick to view the internet as a benefit – not a threat – to its business model, it has been a source of continued success.

LESSON: Those who embraced the web early have often prospered. Understand how this builds your business and makes it easier for the consumer to engage with you rather than only rewarding them for something they would do anyway. Take advantage of technologies that have made options for loyalty programs more readily available and less expensive to implement. The web plus innovation can improve customer engagement and loyalty.

Starbucks competitive advantage

Will Starbucks service model save retail?

Today’s lifestyles demand service that is not only quick but convenient. Convenience has become more synonymous with good service. Successful retailers like Starbucks take this seriously and optimize their business for it – often by leveraging the web.Those that heed these service keys will succeed and find that there are great opportunities for entrepreneurs, franchisees and multi-unit operators in retail businesses. Don’t underestimate the ‘service’ in a service business. For today’s selective consumers, it’s convenience, efficiency and the feeling that the experience takes place “on their own terms” that will keep customers coming (back) through the door.

John B Richards is the former

Executive Vice President of Four

Seasons Hotels, the President

of North American Operations

for Starbucks Coffee Company

and the CEO of Elizabeth Arden

Red Door and Dean and Deluca

during the formative growth

years of these companies. He

is currently an Advisory Partner

and Principal at the New England

Consulting Group. He has driven

service innovation across travel,

hospitality, QSR, retail and

healthcare services.

* Innovation and product “news” is also a hallmark of Starbucks’ strategy: you never bet bored or taken for granted as a Starbucks loyalist.** Starbucks at first was ridiculed for putting stores close to each other to tap local traffic patterns. Later, it became obvious that, strategically, the competition was boxed out of key locations. You no longer “walk a mile” for a Starbucks but “50 feet.”

REAL ESTATE Superior store network

SERVICE SPEED Systems and equipment driven

CONVENIENCE/LOYALTY Online ordering and ongoing loyalty engagement