Will Starbucks Benefit From Digital Platform Expansion?

Starbucks Corporation SBUX highlighted its key strategies to drive growth over the next decade, at its recent 26th Annual Meeting of Shareholders. One of the primary focuses will be on expanding digital relationships, with more than 60 million U.S. customers per month currently, who are not yet members of Starbucks Rewards Program. The company will allow non-Starbucks Rewards members to use the App's Mobile-Order-and-Pay or MOP facility for ordering. Earlier, the service was only available to loyalty members.

Starbucks' MOP service represented nearly 11% of the total U.S. transactions in the fiscal first quarter 2018, up from 10% in the prior quarter and 7% in the year-ago quarter. This initiative allows customers to order before arriving at a Starbucks café and pick up the items at their selected store, thus saving time. The service is witnessing increased usage and can prove to be a key growth driver as adoption increases.

The company will be introducing a number of indoor and outdoor campaigns, designed to build personalized digital relationships with customers.

As retail companies are witnessing a shift in consumer shopping behavior from bricks-and-mortar stores to online shopping, efforts to enhance digital capabilities can significantly boost revenues. Starbucks has been continuously enhancing digital assets, loyalty and e-commerce programs to capitalize on this trend.

Starbucks' membership in the United States increased 11% year over year under the My Starbucks Rewards (MSR) program in the fiscal 2017. The positive trend continued in first-quarter fiscal 2018 with active members rising 11% year over year to 14.2 million. MSR is one of the most important business drivers of Starbucks.

Other new digital initiatives include My Starbucks Barista ordering system and Digital Order Manager — a high-value, low-cost technology to optimize store operations and elevate customer experience.

These digital initiatives are expected to quicken service, increase convenience and enhance customer loyalty, which will boost mobile payment transactions and spur traffic.

Expanding China Business & Reserve Brand

Apart from increasing digital engagement, the company will be focusing on the expansion of its China business and the Starbucks Reserve brand.

The company plans on opening 5,000 stores in China by 2021 and introduce innovation in coffee, store design and digital engagement, in line with the Chinese lifestyle. Notably, the number of stores in China has risen from 800 to 3,200 in the past five years, with an average of a new store opening every 15 hours.

Starbucks plans to open Italian artisan food by Princi stores in Seattle, Chicago, New York and Shanghai. It plans to open Roasteries in Milan and New York later in 2018 and in Tokyo and Chicago in 2019. In the long run, the company's premium store segmentation will include more Starbucks Reserve Roasteries, up to 1,000 Reserve stores and 20% of the Starbucks store portfolio will become Starbucks Reserve bar locations.

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