Starbucks founder and outgoing CEO Howard Schultz said in May the brand had a “breakthrough idea” in the works. It was built from the question of what being a member of Starbucks’ community looks like as digital continues to rattle the “third-place.” Schultz called it “Starbucks Web 3.0,” which essentially imagines an arena for NFTs led by CMO Brady Brewer and Adam Brotman, the architect of Starbucks’ mobile order and pay and digital experience.
Simply, Schultz said, Web 3.0 plans to “create an authentic digital third-place experience.” It would also drive new revenue streams.
On Monday, the brand pulled back the curtain on “Starbucks Odyssey.” Powered by Web3 technology, it will offer rewards members and employees the opportunity to earn and purchase digital collectible assets that will unlock access to benefits and “immersive coffee experiences.”
Starbucks claims it’s one of the first companies to integrate NFTs with a loyalty program at scale. Again, doing so in an effort to foster a digital community or “digital third place,” as Brewer noted in May as well.
Starting September 12, customers and employees can join a waitlist to access the Starbucks Odyssey experience, which expects to launch later in the year.
“Starbucks has always served as the Third Place, a place between home and work where you feel the warmth of connection over coffee, community and belonging. The Starbucks Odyssey experience will extend the Third Place connection to the digital world,” Brewer reiterated Monday in a statement. “For the first time we are connecting our Starbucks Rewards loyalty program members not just to Starbucks, but to each other.”
Brewer said Web3 technology will enable members to “access experiences and ownership that was not possible before.” These benefits will come digitally, physically, and experientially, he added.
“By integrating into the Starbucks Rewards ecosystem and grounding the experience in coffee, connection and community, we are entering the Web3 space differently than any other brand, while deepening our members’ connection to Starbucks,” Brewer said. “Our vision is to create a place where our digital community can come together over coffee, engage in immersive experiences, and celebrate the heritage and future of Starbucks.”
Starbucks’ active rewards membership in Q3 reached 27.4 million members, up 3.2 million (13 percent) year-over-year and 3 percent sequentially. The cohort drove a record 53 percent of U.S. company-operated revenue.
When members login, they’ll be able to engage in Starbucks Odyssey “journeys,” or a series of activities such as interactive games and challenges to “deepen their knowledge of coffee and Starbucks,” the company explained. Members will be rewarded for completing these “journeys” with a digital collectible “journey stamp” (NFTs).
People will also be able to purchase “limited-edition” stamps (NFTs) through a built-in marketplace within the Starbucks Odyssey web app experience. Limited-edition stamps will be available for all members to purchase with a credit card. No crypto wallet or cryptocurrency will be required.
It allows users to “claim an ownership stake in their loyalty to Starbucks,” the company said.
Each digital collective stamp will include a point value based on rarity. They can then be bought or sold among members within the marketplace, with ownership secured on a blockchain.
As stamps are collected, members’ points will increase, unlocking access to benefits and experiences not available until now.
For instance, a virtual espresso martini-making class, artist collaborations and unique merchandise, and exclusive events at Starbucks Reserve Roasteries. Trips to Starbucks’ Hacienda Alsacia coffee farm in Costa Rica will be up for grabs, too.
Starbucks’ employees and outside artists collaborated to create the digital artwork. The brand also plans to donate a portion of proceeds from the sale of limited-edition stamps to various causes.
Starbucks said the program will evolve as feedback rolls in, and it aligns with broader sustainability aims. The brand is working toward deploying a “proof-of-stake” blockchain technology built by Polygon that uses less energy than first generation “proof-of-work” blockchains.
“This is just the beginning; Starbucks Odyssey is one of the ways we are reinventing the Third Place to meet our customers wherever they are—in a Starbucks store, on-the-go, or online. We are creating an accessible, digital Third Place community enabled by Web3 technology where Starbucks Rewards members and our partners can connect through unique experiences and come together around the love for coffee,” Brewer said.
Starbucks is in the midst of a wider “Reinvention Plan” that’s touching ever lever from automation to worker compensation to store design.
But a key tenet across the shift in how Starbucks’ base engages with the brand. And much of that is leaning digital.
Drive-thru, mobile order and pay, and delivery accounted for 72 percent of Starbucks’ Q3 domestic revenues, a number that rose 9 percent systemwide to a quarterly record of $8.2 billion.
VP and CFO Rachel Ruggeri said in Q3 Starbucks’ rewards customers increased greater relative to non-rewards users, although both hiked. The brand observed all-time high member spend.
“More strategic pricing, more premium beverages. More personalization as well as greater attach,” she said. “… We think that has a benefit for us over the longer term, particularly as we continue to personalize the experience more uniquely so that we can have a deeper relationship and engagement with the customer, which will allow us to have the ability to continue to provide value in ways that are more personalized to them individually as a customer.”
The emphasis going forward, in other words, to deliver value through engagement.
Matt Kates, SVP of loyalty program provider Clarus Commerce, believes the new program will be a goldmine of customer data for Starbucks.
The extra layer of Web3 gaming and rewards will help the chain understand what kinds of perks motivate customers the most, he says—will they work toward NFTs that unlock free drinks and food, or will they push for those higher, more exclusive experiences like a Reserve Roastery visit?
He echoed Brewer’s comment on developing a community that feeds off user connections, where customers interact with each other and develop a tribe-like approach to loyalty.
According to a recent study by Clarus Commerce, 22 percent of customers said their favorite brands were ones that built a strong sense of community, and 34 percent said online groups were the No. 1 way to make this happen. Being able to connect in a Web3 game or program is one way to make that happen.
"Especially since consumers can buy and sell rewards from each other," Kates says. "Starbucks has already become a physical 'third place'—a place between home and work—for thousands of people, but this new program could become a digital third place as more consumers turn to online experiences to connect with brands and other people. While Web3 and metaverse initiatives are still widely in their infancy, Starbucks is making a big move to directly layer it into an already successful loyalty program.”
With 74 percent of Gen Z are interested in acquiring NFTs this year, Odyssey will likely see some good engagement as well.
“Starbucks has one of the most popular loyalty programs of all time, and part of that success is thanks to its experimentation to keep up with changing consumer interests," Kates says.
"While many Web3 marketing campaigns offer consumers collectible NFTs that don’t hold much intrinsic value, Starbucks Rewards digital stamps also provide real value to rewards members by unlocking benefits and experiences that connect to the digital and physical world," he adds. "Some customers may decide to cash in their rewards frequently for drinks and food items, while others may work toward larger experiences like Starbucks Roastery trips, mixology classes and other unique perks that are new to the Starbucks program. While the program could be another revenue stream for Starbucks, it will also provide heavy insight into consumer motivation and other zero-party data related to individual purchasing habits. And as data sharing becomes more difficult, consumers expect incentives and rewards in exchange for their information, which Starbucks is providing."
Starbucks’ U.S. same-store sales increased 9 percent in Q3 as average ticket bumped 8 percent. Average weekly sales, executives said, were at all-time highs in corporate stores—30 percent above pre-COVID-19 levels. Traffic was up 1 percent, year-over-year, and still below 2019 marks.
Beverage growth rose 9 percent with cold options accounting for 75 percent of the company’s beverage sales.
More employee perks on the way
In other Starbucks news Monday, the company bolstered its benefits suite (for non-union workers) around two areas—savings and student loan debt. Kicking in on September 19, the company will introduce “My Starbucks Savings,” which, in tandem with Fidelity, allows U.S. employees to contribute a portion of after-tax pay on a recurring basis directly from their paycheck to a personal savings account.
Starbucks will contribute $20 and 50 credits at savings milestones up to a total of $250 per incentive-eligible employee, it said.
“We’ve heard from our partners and know that pressures of inflation, in addition to debt and savings are weighing heavily on them,” Ron Crawford, SVP total rewards, said in a statement. “Providing industry-leading benefits for our partners is a cornerstone of who we are as a company. As we reinvent the future of Starbucks, together with our partners, we knew we had an opportunity to further support the financial well-being of our partners and their families.”
Additionally, Starbucks plans to launch a Student Loan Management Benefit via Tuition.io to help workers manage and optimize repayments. Employees can access resources and individual coaching to manage student loan dept, such as repayment options and loan refinancing. Users will see all their student loan debt in one place.
“This is just one more way we are co-creating a meaningful partner experience and a better future for Starbucks,” Sara Kelly, Starbucks chief partner officer, added in a statement.
The new options join wage lifts that went into effect in August and brought the average rate up to $17 per hour ($15 floor). Likewise, it’s not a move available at units that have unionized. The brand expects to spend about $1 billion this year on improvements, with much of it tied to wages.
Starbucks doubled training investments to about 40 hours and reintroduced its Black Apron and Coffee Masters credential. Also, Starbucks implemented a new digital employee engagement platform and expects to roll universal tipping and a badging program by year-end 2022.
Starbucks is looking to increase sick time accrual and implement a new financial stability toolkit benefit.
Going deeper into tipping, Starbucks said earlier it would introduce credit/debit card options by late 2022. Schultz described the digital tipping opportunity in May as “perhaps the No. 1 single issue to provide more cash in the hands of our people.” Presently, customers can only tip via the Starbucks Card.
Inside units, Starbucks is working to automate some tasks and improve flow, such as new bar configurations, patented coffee technology, novel store prototypes, and key equipment acceleration to drive efficiencies, like Clover Vertica, an on-demand brewer that combines vacuum-press technology with control over the temperature of the water and length of brew.