When Starbucks opened its first store in Pike Place Market in 1971, it didn’t serve lattes. But it soon became a hub of connection, a place to sample a cup of Sumatra coffee or learn about beans from Latin America. In 1987, Starbucks expanded into a European café model with added seating and espresso beverages. Customers lingered in stores, even if they had no one to meet for the simple experience of being met with a friendly face and taking a moment to pause in the day. There wasn’t really a term for what was happening until a few years later, in 1989, when sociologist Ray Oldenburg coined the term “third place,” describing a place beyond home and work where people could gather, relax and talk.
Fast forward 35 years, and as the world has evolved, so has the Third Place. Starbucks stores are serving more people each day than ever, with customers often ordering on their phones instead of at the counter. The menu has grown from just a handful of drinks to dozens, with stores built for mostly hot beverages straining to meet the demand for more customized drinks and cold beverages. And food is an increasingly important part of the mix – what was once a case of mostly breakfast pastries case is now a food platform that includes warmed sandwiches, available all day long.
As Starbucks is reinventing the company, it is also reimagining the Third Place – keeping coffee and connection at the center.
“Today we find ourselves at another unique moment; a moment that challenges us to reinvent and think differently,” said John Culver, group president, North America and chief operating officer. “Our partners have come to expect more from us. Our customers have come to expect more from us. And it is clear our physical stores must modernize to meet this moment.”
Culver and Brady Brewer, Starbucks executive vice president and chief marketing officer, shared an inside look at the company’s plans for the evolution of the Third Place at the company’s 2022 Investor Day conference on Tuesday in Seattle.
“When we think about our existing store portfolio and our investments, they must deliver in a few critical areas,” Culver said. “Reducing the level of complexity and making work easier for our partners, enabling stronger engagement and connection between our partners and the customers they serve, and delivering experiential convenience, in a way only Starbucks can.”
Purpose-built store design
In July, chief executive officer Howard Schultz announced five strategic shifts Starbucks will make as part of its Reinvention plan to adapt to the changing needs of customers and store partners. As an example, while customers used to primarily order hot beverages, now that’s shifted to cold year-round. In the summer, nearly 80 percent of the drinks ordered are cold. And, requests for customizations have risen dramatically in recent years with two in three drinks now being customized by adding more espresso shots, flavors and customers increasingly choosing plant-based milks or cold foam.
One of the strategic shifts Schultz announced is to “reimagine our store experience for greater connection, ease and a planet positive impact.” Starbucks purpose-built store design approach will help modernizing physical stores to serve the increasing demand while creating an environment that is inclusive and accessible, through the lens of sustainability. To help drive innovation, Starbucks has turned to the team of R&D experts and baristas working side-by-side in Starbucks Tryer Center, to help streamline the work behind the counter, and enable more time for genuine human connection.
Next year, Starbucks will invest an incremental $450 million in North America, including modernization of existing stores through new equipment that enables greater efficiency and reduced complexity for store partners. The company also plans to add 2,000 net new stores in the U.S. by 2025, diversifying the portfolio of stores across cafes, pick up stores, drive thru-only, and delivery-only locations to meet Starbucks customers whenever and wherever they want.
Brewer added, “As we drive even more demand ahead, we are enabling our stores to handle even more capacity, while significantly reducing the effort required from our partners, so that we can enable partners to focus on what they love doing – crafting the world’s best coffee and connecting with customers.”
Coffee and craft
Starbucks is reimagining the coffee experience with breakthrough beverage innovation that is elevating coffee craft and quality. Whether the coffee is hot or cold – Starbucks is turning to proprietary, patented technology invented in-house, like the new Clover Vertica™, which offers every customer a freshly brewed cup of coffee in just 30 seconds.
“Coffee is at the center of who we are and remains on the forefront of anticipating what customers love and our partners are proud to deliver,” Brewer said.
Elevating experiential convenience
The Third Place has never been defined solely by a physical space, it’s also the feeling of warmth, connection, a sense of belonging Starbucks. Digital technology is helping augment and extend that feeling of connection with customers – whether they are in Starbucks stores, in their cars, on their doorsteps.
One way Starbucks is doing this is through Mobile Order on the Starbucks app. Starbucks is enhancing Mobile Order to make it easier for customers to order, anticipate when their order will be ready, and make it easier and more efficient for partners to serve mobile order customers, eliminating some of the stress at peak times. Mobile ordering is also being extended to more licensed locations at airports and grocery stores.
The company also unveiled Starbucks Odyssey, a new experience powered by Web3 technology that will foster connection and unlock access to new experiential benefits and immersive coffee experiences for Starbucks® Rewards members and partners in the U.S. Starbucks is one of the first companies to integrate Web3 technology with an industry-leading loyalty program at scale, while creating a community online that will enable new ways for Starbucks to engage with its members and its partners. As of Monday, customers and partners are now able to join the waitlist for a chance to be among the first to receive access to the Starbucks Odyssey experience, which will launch later this year.
“We have a heritage of continuously adapting how we serve customers, anticipating where they are going and innovating to take them there,” said Brewer. “Connection is who Starbucks has always been.”