Starbucks to transform U.S. store portfolio and close some 400 locations

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Starbucks to transform U.S. store portfolio and close some 400 locations

By Marianne Wilson - 06/10/2020

Starbucks Corp. will  transform its U.S. stores — and shutter up to 400 locations — as it focuses on digital integration and convenience to meet “shifting customer behaviors.”

During the next 18 months, the coffee giant plans to accelerate the expansion of convenience-led store formats such as drive-thru, mobile order only, counter pickup and curbside pickup. It also plans to relocate stores from low-traffic malls to new locations that combine the store experience with drive-thrus.  

  The digital pivot strategy is not new — Starbucks had been planning to roll out the changes during a three- to five-year period. But the company said it decided to push up the timeline to align with evolving customer preferences that have accelerated as a result of COVID-19, including higher levels of mobile ordering, more contactless pick-up experiences and reduced in-store congestion, all of which naturally allow for greater physical distancing.

As part of the transformation, Starbucks will also close up to 400 company-operated stores. (Starbucks typically closes about 100 stores annually due to leases expiring and market conditions.) It also plans to relocate stores from low-traffic malls to new locations that combine the store experience with drive-thrus. 

In addition to the U.S. store repositioning, Starbucks  will restructure its company-operated business in Canada during the next two years, with the potential of up to 200 additional stores closures ( with some of those stores being repositioned.)  The company still plans to open approximately 300 new stores in the Americas in its current fiscal year, down from its original goal of 600. About 40 to 50 of the new locations will only offer pickup or drive-through.

“As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers,” said Kevin Johnson, CEO, Starbucks. 

 Starbucks said it plans to expand its new and well-received  Pickup store format in dense markets including New York City, Chicago, Seattle and San Francisco. In suburban areas, the company plans to expand convenience-led enhancements such as curbside, drive-thru and walk-up windows.

Starbucks noted that prior to the COVID-19 crisis, approximately 80% of its U.S. transactions were on-the-go, driven in part by the ability to order and pay ahead using its app. Citing customers’ increased use of the app to order ahead, and the national availability of Starbucks Delivers through Uber Eats, Starbucks said it will renovate select store layouts, including the addition of a separate counter for mobile orders at high-volume stores to make it easier for customers and delivery couriers to pick up their order.

Here are more details about Starbucks store plans.

• Starbucks Pickup: Starbucks opened its Pickup store in November, in Manhattan, with a second location, also in Manhattan, now set to open. 

“By blending traditional Starbucks stores in dense markets with these new Starbucks Pickup stores optimized for the mobile order occasion, we not only improve the customer experience for those who want to sit in our store and enjoy their beverage but also create a great experience for those customers who want a convenient way to pick up their beverage on-the-go,” Johnson said in a letter to employees.

• Curbside Pickup: Customers will soon be able to utilize curbside pickup from their car, using the Starbucks App to order and pay ahead as well as check-in at designated parking spots at the store once they arrive. Over the coming months, Starbucks will increase the number of stores that offer curbside pickup and pilot a select number of locations to exclusively offer this format. 

• Drive-Thru: The company plans to continue to expand and enhance the drive-thru for customers including opening new locations outside of densely populated cities and in new markets. Also in the works are new designs that could include double-lane drive-thru, or drive-thru plus curbside pickup, all of which would leverage the ordering and payment capabilities of the Starbucks App.