Starbucks CEO Brian Niccol wants everyone to know the “third place” is alive and well.
It’s a concept the coffee giant has long embraced, giving guests a comfortable space between their home and workplace. However, with digital sales ramping up in recent years—accelerated by the pandemic—this idea hasn’t received as much attention. But Niccol says it’s as needed as it ever was.
“We have a lot of work to do to ensure every Starbucks provides that experience, all for the price of just a cup of coffee with a free refill,” Niccol said during the chain’s Annual Meeting of Shareholders.
To reinvigorate the third place experience, Starbucks is testing a new store model that considers expanded seating options catering to work, socialization, and relaxation; more power outlets to encourage longer stays for remote workers, students, and professionals; and an improved ambiance to make stores feel more inviting and community-oriented. The new layout includes dedicated areas for mobile pickup and new risers and pickup shelves to allow for better organization and distinction between in-store guests and mobile customers. Additionally, the brand is piloting abundant food displays to showcase offerings and encourage guests to try new items and a redesigned espresso bar to add a sense of theater to the coffee ordering experience.
“We’re working hard to ensure our coffee houses have the right vibe,” Niccol said. “We want to invite customers in, showcase our great coffee, provide a comfortable place to stay, and make them feel like their visit was time well spent.”
The new design is part of Niccol’s “Back to Starbucks” plan, which is not about reverting to the past, but reinforcing the brand’s core values and bettering the guest and employee experience.
The first part is reintroducing Starbucks to the world. This means shifting away from discounts in favor of highlighting coffee quality and community and simplifying the menu. Another is upgrading the customer experience by cutting wait times to four minutes, adding 3,000 labor hours in stores nationwide, testing a more efficient staffing model, and bringing structure to mobile ordering. To help create a coffee house atmosphere, the brand reintroduced condiment bars, ceramic and glass mugs for in-store guests, and handwritten cup messages. The company also changed its code of conduct policy so that guests must place an order to stay in the dining room or use the bathroom.
Starbucks is also investing in employees’ well-being. The chain doubled paid parental leave for eligible U.S. workers and committed to promote from within for 90 percent of retail leadership roles in the next three years.
The strategy has come with growing pains. In late February, Starbucks announced it would lay off 1,100 corporate employees and remove several hundred unfilled corporate positions to create more versatile and adaptable decision-making.
Starbucks’ financial results remain below expectations, but progress is evident.
Starbucks’ U.S. quick-service share recovered in Q1 following two quarters of declines. And it did so despite reducing the frequency of discount-driven offers—there were 40 percent fewer such transactions in the period, year-over-year. Through the quarter, the brand saw a shift in sales mix toward coffee and espresso-based beverages, which over-delivered and compensated for lower-than-expected performance across holiday promotions.
Same-store sales declined 4 percent (8 percent drop in traffic and 4 percent rise in ticket) in the North America and U.S., yet improved over the course of three months, and non-Starbucks Rewards traffic grew, quarter-over-quarter. Members and spend lifted versus Q4 and year-over-year, and price parity for non-dairy milk customizations brought back lapsed Rewards users.
“Our recent results have been disappointing, but we have a clear path forward. This path is grounded in reconnecting with who we are when we’re at our best,” Niccol said.
