Changes in performance and Starbucks ‘Web 3.0’
Given all of the guest trends in play, most vividly on the digital transaction side, Starbucks’ models are adjusting. Ninety percent of new store growth going forward, Schultz said, will feature drive-thrus. And this coming fleet will integrate fresh store designs and technology, including more handheld devices and equipment improvements to boost throughput. Essentially, the line-busting tablets you see at an increasing number of brands coming out of COVID—a face-to-face ordering model Chick-fil-A and In-N-Out Burger have deployed for years.
Drive-thru, mobile order and pay, and delivery collectively totaled 75 percent of U.S. company-operated sales in Q2. Rewards members delivered 54 percent of revenue—the highest level of engagement on record for Starbucks, and 2 percentage points up from last year.
Schultz added he feels Starbucks has a “breakthrough idea” on its hands around the launch of what’s being labeled “Starbucks Web 3.0.” While the company promised more details later—it’s moving its investor day up to September from December—the platform is essentially an arena for NFTs that’s going to be directed by Brewer and Adam Brotman, the architect of Starbucks’ mobile order and pay and digital app experience. “I believe Web 3.0 will create an authentic digital third-place experience and drive substantial new revenue streams for Starbucks and be accretive to the brand,” Schultz said.
Brewer said Starbucks’ aim to extend third-place positioning into a new community reflects what’s taken place over the past two-plus years, and is a way to bring “who Starbucks has always been at our core” into a changing climate. “We are creating the digital third place,” he said.
“To achieve this, we will broaden our framework of what it means for people to be a member of the Starbucks community, adding new concepts such as ownership and community-based membership models that we see developing in the Web 3 space,” Brewer added.
These initiatives will align with Starbucks’ sustainability commitments. “Imagine acquiring a new digital collectible from Starbucks, where that product also serves as your access pass to a global Starbucks community, one with engaging content experiences and collaboration all centered around coffee,” Brewer said, noting a launch would likely occur this year.
“In the world we're living in today, our customer base is getting younger, they're digital natives, and they expect Starbucks to be as relevant outside of our stores as we are inside,” Schultz said.
Going back to demand, Starbucks’ average ticket reached an all-time high in Q2. Naturally, price increases did much of the heavy lifting. But food attach and sales hit record levels, too, increasing 25 percent from the prior year.
Schultz said the equipment in Starbucks’ stores, as well as the layout, have not been configured for the way guests are using the brand today. Equipment and tech enhancements are on deck in turn, including resolving all “non-critical” repair and maintenance immediately, Starbucks said, and moving to upgrade all in-store iPads with new models. The company will speed rollout of new equipment like MerryChef Ovens and Mastrena 2 espresso machines as well.
Starbucks offers automated ordering across the U.S. for food and merchandise and is currently in proof-of-concept testing for beverage items, Schultz said. “That will also be an unlock to help improve the partner experience to reduce complexity and to allow our partners to focus on our customers,” he said.
Meanwhile, Schultz said, Starbucks will “do everything we can” to upgrade algorithms of labor scheduling and update its app to provide guests with a more accurate method of knowing when their beverage will be ready. “If we want to exceed the expectations of our customers, we have to exceed the expectations of our people,” he said.
Having too much demand wasn’t on Schultz’s plate when he last returned as CEO (2008–2017; he first held that title from 1985–2000). The opposite was true. “And so, the demand that we have right now is such a blessing, such a gift,” he said. “What we have to do is harness the issues that we have to deal with in terms of capacity, exceeding the expectations of our people. I've been here long enough to understand what the challenges are and long enough to understand the extraordinary opportunity Starbucks has in the marketplace domestically and around the world.”