Personal Finance

Starbucks Plans to Raise the Bar on Its In-Store Experience

People gather around a bar in Starbucks' Shanghai Roastery.

Starbucks (NASDAQ: SBUX) CEO Kevin Johnson and Chairman Howard Schultz believe that successful retailers will need more than just well-liked products to get consumers to visit stores. Instead, the chain's leaders feel that reaching consumers will require speaking to customers digitally while also offering "experiential retail."

"We think successful physical retailers will have some blend -- some more on one than the other -- but some blend of experiential retail... and digital engagement," CFO Scott Maw explained during his talk at a recent conference.

This isn't new for the coffee chain. Its goal to be a "third place" after work and home is a type of experiential retail and it has long been a digital pioneer. What's changing is how the company implements its strategy for both as it fights to give people a reason to leave their homes.

People gather around a bar in Starbucks' Shanghai Roastery.

Premium locations including its Roastery in Shanghai are part of the chain's experiential improvements. Image source: Starbucks.

What is Starbucks doing?

The cafe chain is doing two things to deliver on experiential retail. First, it's actually making visiting some of its stores a more engaging event by building Roastery locations , adding Reserve stores, and bringing premium Reserve coffee to some of its locations.

"At the peak of that is the two Roasteries that we have opened in Shanghai and Seattle, but also the many, many stores that have Reserve coffees with Clover, Reserve stores that we're opening... and the ability to extend experiential retail, to premiumize our product," he said.

The second piece of the puzzle is making visiting a store, getting served, and getting out as convenient as possible for customers who wish to experience Starbucks that way. Maw believes the company, which has been a pioneer in app-driven order and payment, can continue to improve its digital offerings.

"Increasingly, we're opening drive-thru locations because that gets at an opportunity and an occasion for customers to have the faster experience, and our investment in throughput at peak, which has had a big pay-off for us over the last nine months or so," he said.

Employees lead the experience

Technology only works if the people acting because of it are optimized. That's an area where Starbucks has been working to improve as it has hit some bumps in the road caused by Mobile Order and Pay.

During last year's holiday season, the chain actually saw traffic fall in some of its busiest stores during peak morning hours due to bottlenecks created by the app's ease of ordering. Of course, consumers are happy to easily place an order, but they grow quickly frustrated when it isn't filled quickly.

"What we did is we focused on training on specific roles, on really getting the partners that were in the stores pointed at where the biggest activity was and where the biggest bottlenecks were," Maw said.

Within about three months, the chain saw comparable sales in those stores go from negative, to flat, to positive. Now, because employees in those cafes were trained to handle bottlenecks, comparable-store sales have actually grown faster at those stores than at others in the chain.

Digital for all

Currently, only Starbucks Rewards members have access to Mobile Order and Pay. That's going to change at all stores by the end of the year, allowing anyone who downloads the app to use the order-ahead technology. The chain also plans to reactivate accounts for previously inactive users.

"We've been marketing to them for a while now and having some success in converting them, but we're going to go far deeper," Maw said. "The offers will be richer, because we know they pay off."

Lastly, the chain wants to make it easier for customers to connect to WiFi. It's going to do that by making it so that once a person signs up and gives an email, he or she will automatically connect upon entering a Starbucks.

Take away the pain

Experiential retail, at least how Starbucks sees it, is a mix of giving people a reason to want to visits its cafes while also making the experience of doing so as pleasant as possible. These joint initiatives, along with continued product innovation, should accomplish that while also giving the chain millions more customers that it can digitally market to.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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