Should Starbucks close its online store?

Discussion
Source: starbucks.com
Aug 28, 2017
Tom Ryan

Starbucks is closing its online e-commerce site that sells coffee, tea, drinkware, syrups, water bottles, brewing accessories and gift sets.

The microsite, shop.starbucks.com, which has been operating since 2011, is currently offering up to 50 percent off on items. The site will close on October 1. The news of the pending closure was revealed by GeekWire and Business Insider.

“We’re continuing to invest in amplifying Starbucks as a must-visit destination and are looking across our portfolio to make disciplined, thoughtful decisions,” said Starbucks’ spokesperson Maggie Jantzen in a statement given to media outlets. “This includes doubling down on our digital relationships with our customers to further elevate our digital flywheel through our mobile app and our Starbucks Rewards loyalty program.”

Products available at shop.starbucks.com will continue to be sold at third-party sites such as Amazon and the company’s grocery partners. Ms. Jantzen added, “Continued integration of these digital and mobile customer connections into our store experience is among the highest priorities for us, and to enhance that focus we’ve looked for ways to simplify our current efforts.”

Starbucks is meanwhile finding fast growth in grocery aisles. In releasing results for its third quarter on July 28, Starbucks officials said its Starbucks K-Cup share increased 1.4 percent to 16.6 percent while its roast and ground share expanded 1 percent to 13 percent.

Starbucks officials vowed on its Investor Day last December to double-down on its “digital flywheel” push with an emphasis on customer acquisition, spend-based rewards, personalized offers and convenient ordering

Matt Ryan, global chief strategy officer for Starbucks, said on the chain’s third-quarter conference call, “Today, we are enabling a new generation of digital innovation that will begin rolling out in waves starting this fall. This fundamental modernization of our technology stack will replace legacy rewards and ordering functionality with the new scalable cloud-based platform for rewards and ordering, improved customer data organization, and tighter integration with store-based operating systems, including inventory and production management.”

DISCUSSION QUESTIONS: Will Starbucks come to regret closing its online store? Do you think the closing has more to do with its CPG business, its mobile push or other reasons?

Braintrust
"I think this is a great example of a brand focusing on their strengths and what their customers’ true needs are."
"This move almost rings of exclusivity. You have to come into the store to get the goods. Will it hurt the business? I doubt it."
"It’s always great to see companies move against the grain — against what headline readers would expect."

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24 Comments on "Should Starbucks close its online store?"

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Mark Ryski
BrainTrust

I don’t think this will have much impact on Starbucks at all. While the decision to close the online store may seem counter-intuitive, it’s not when you consider how Starbucks generates the majority of its revenue — from selling coffee and food in its stores. As noted, with so many other more important priorities, shutting down the online store was likely not that difficult a decision. And Starbucks could always decide to re-launch its store in the future if it makes sense to do so.

Anne Howe
BrainTrust

Starbucks is making a wise decision to shut down its online store, a decision that is especially relevant as it decides to focus more on its grocery partners. The coffee category is important to grocery and if Starbucks can invest in helping retailers differentiate in-store, the upside opportunity will take care of itself.

Dick Seesel
BrainTrust

It seems counter-intuitive for Starbucks to close its e-commerce site (when brick-and-mortar stores are scrambling to figure out how to generate more online sales). But operating the site is clearly an operating distraction when Starbucks has plenty of other growth vehicles to sell goods online — plus the priorities of integrating its Teavana brand and developing new concepts.

Meaghan Brophy
BrainTrust

Well… I’m an avid Starbucks fan and didn’t even realize they had an online store until its closing made headlines last week. I think Starbucks will be just fine with its closing. As Mark said, most of their sales come from in-store purchases anyway. I think this is a great example of a brand focusing on their strengths and what their customers’ true needs are. Starbucks does not need an online store just for the sake of having an online store.

Celeste C. Giampetro
BrainTrust

I’ll second that, Meaghan. It never would have occurred to me to check an online presence for Starbucks. It seems like an unnecessary distraction from the power of a physical presence. Innovating the in-store experience is their true strength.

Phil Masiello
BrainTrust

Starbucks’ primary business is selling cups of hot and cold coffee products and food items in retail stores. Not very conducive to an e-commerce shopping experience. The mobile app is very important for driving engagement and retention. But what is the purpose of the store?

Starbucks is correct. Their products are sold in over 100 other online stores. Why carry the inventory and deal with the pick, pack and ship issues of non-core products? Focus on building a better experience in the stores and let other e-commerce stores carry your hardware.

I think it is a smart move and will get Starbucks more focused on what is important — the store experience.

Lee Kent
BrainTrust

This move almost rings of exclusivity. You have to come into the store to get the goods. Will it hurt the business? I doubt it. If they play this smart, it could actually do just the opposite. But that’s just my 2 cents.

Ricardo Belmar
BrainTrust

This is a numbers decision — Starbucks’ online store isn’t necessary given the many grocery relationships (including Amazon) the retailer has to drive its CPG business. Plus, Starbucks is truly a destination where they can sell their CPG products in their own stores. With the success of their mobile app, customers would be more inclined to order through the app and pick up their items along with a latte rather than wait for it to be shipped from Starbucks.

While it seems counter-intuitive to be closing an online store in this day and age, this may be a smart move for Starbucks.

Ian Percy
BrainTrust

“To thine own self be true.” In “Hamlet,” Polonius was the chief counselor of the king. Good advice then, good advice now.

Starbucks is an icon, a “thing,” an expectation, a promise and, most of all, a place to be. Polonius says to Matt Ryan and other executives, “You mess with that at your peril.” Starbucks has done what so few retailers understand and that is to have an unassailable identity.

Yes other channels are available, maybe even profitable ones. But if they water-down your identity, avoid them.

Steve Montgomery
BrainTrust

Starbucks closed its online store and rid itself of a distraction. In the words of Willie Sutton, “rob banks because that’s where the money is.” The money for Starbucks comes from its stores and the grocery aisle not from selling cup, mugs, etc. It can get these items in the hands of its loyal fans by using third parties rather than having to handle them internally.

Mark Price
BrainTrust

Most marketers consider integration of customer experience across all channels to be essential to reinforcing customer engagement and driving long-term customer value. With Starbucks, which has an unusually digital audience, this is all the more so. That’s why it is surprising that Starbucks would close their online store. Their customer base engages heavily online and when Starbucks outsources their online purchases to Amazon, they lose critical customer information.

The closing of the Teavana stores would seem to provide another rationale for maintaining and expanding the Starbucks online presence.

We will have to see what Starbucks rolls out as an alternative to maintain their engagement with their customers (and all the customer information).

Gene Detroyer
BrainTrust

I spend a lot of time in Starbucks around the city and have been doing so since they opened their first store down the street about 15 years ago. My grandkids give me Starbucks gift cards for Christmas. Yet until I read this discussion I didn’t even know they had an online store.

Simply put, there is no need for it. Anything you can get in a Starbucks online store you can get at Amazon and other retail sites.

While I find Starbucks’ mission statement a bit hokey — “Our mission: to inspire and nurture the human spirit — one person, one cup and one neighborhood at a time” — I am not sure having an online store fits.

Neil Saunders
BrainTrust

This is a niche part of Starbucks’ business which contributes little, if anything, to the bottom line. Unlike many parts of retail, Starbucks’ core business model is not under threat from online so there are very few strategic reasons for this site to exist. It is much more commercial for Starbucks to drive merchandise and CPG sales through its own outlets and third parties and to focus on digital/mobile ordering at its own stores.

Doug Garnett
BrainTrust

It’s always great to see companies move against the grain — against what headline readers would expect. Usually these kinds of moves are also quite smart.

But why here? What Starbucks didn’t say was that they weren’t continuing to invest heavily in leveraging digital opportunity. Rather than their opportunity being “online sales,” it’s clear that apps, rewards, online ordering and in the entire range of smart digital services is where their future lies.

That said, I almost lost faith in the move — with the cluttered and incomprehensible comment at the end of the article by their digital chief. Always sad to see buzzword-overloaded quotes from analyst calls.

Mohamed Amer
BrainTrust

Starbucks has been about the experience — about becoming the “third place” (after home and work). The brand wants to be fully integrated in your life. They have invested in the store to impact how you think about the physical presence, and to impact your senses — from smells to the visuals and sounds to the cool Starbucks energy. And while you’re there, you can enjoy some great coffee and snacks with your friends. Experience is their core competency. Their baristas are their brand ambassadors, their customers are their advocates.

This leads me to suggest that shutting down their online store — not their online presence and identity — is a non-event for most of their customer base. This move actually helps the company focus on what’s more relevant to their customers. What is important is continuing to work on integrating the store experience with mobile capabilities to help Starbucks further improve its “third place” experience.

Ryan Mathews
BrainTrust
Let’s see … Starbucks is buoyed by its sales in physical stores, is bailing on the digital sales side of its business and is turning that important channel over to third parties. Um … what could go wrong? Well, it seems to me just about everything. Or, to answer the question directly, yes, I do believe they will come to regret it. This smacks of a new retail heresy I’m going to call, “channelism,” or the belief that it is possible to be not fully available to the consumer on any and all of their terms. To be commercially viable you have to be present in every way a consumer might want to reach you or risk losing sales and/or control of your brand. Let’s take the notion of price for example. To be attractive on say Amazon, Starbucks will have to discount. If they discount on one digital platform they will have to discount on all of them. Great strategy if you believe physical store growth will make up the lost margin. I believe branders need to learn how to develop a profitable, sustainable 360 degree sales strategy that allows them to meet consumers wherever and however they live.… Read more »
Larry Negrich
BrainTrust

E-commerce sites, run well, cost money and need to be a priority for the company. Clearly for Starbucks an online visit does not equate to a visit to a physical store where one can share the common Starbucks experience of waiting for 20 minutes for a coffee behind patrons who are paying $6+ for variations of ice, coffee, dairy and flavorings concocted into the latest drink — just saying.

Shep Hyken
BrainTrust

Good for Starbucks! Recognizing your strengths, opportunities and weaknesses, and acting accordingly, shows leadership is paying attention to what Starbucks needs to do to give their customers the best Starbucks experience.

Peter Fader
BrainTrust

Very bad idea, Starbucks! As some (but surprisingly few) folks have commented, it’s a big mistake to give up on a channel of distribution (and a customer touchpoint) like this.

It doesn’t matter much that Starbucks has little volume in this channel: what matters more is that it is likely populated disproportionately by high-value customers. You don’t want to pull the rug out from under them. Unless they clearly demonstrate otherwise, Starbucks is making a mistake.

Come on Starbucks! I’ve been touting you as a great example of customer-centric transformation, but this is a step backwards. Say it ain’t so!

Cate Trotter
BrainTrust

The Starbucks experience is really about the physical — physical stores, physical products, physical experiences. Closing its online store doesn’t seem like it will be a huge issue. It’s not as though it is shutting down its website or online presence, the company will still have a digital offering, but clearly its app and other activities are proving more beneficial. Equally there are lots of other online channels which Starbucks can sell its products through — I’m sure this won’t put a huge dent in its success.

Kenneth Leung
BrainTrust

Makes sense given Starbucks should focus on driving business to the store for consumption and merchandising items are best fit within the context of the store visit, or within the context of ordering coffee. If someone really wants Starbucks merchandise as a gift, it should be available as part of the coffee ordering process and not a separate marketplace. I can see someone ordering a gift card/merchandise combo and do purchase/deliver through online ordering. That makes more sense.

Jett McCandless
BrainTrust

I believe it’s actually store.starbucks.com.

Startbucks isn’t experiencing the same brick and mortar downturn that retailers are, nor are they seeing the same uptick in eCommerce. I think it’s safe to assume that they know what’s best for their online business ventures, and I think there is more to their current strategy than we know. I expect to see some variation of online sales continue, but probably a non-traditional form. Nobody views Starbucks as a retailer, so this isn’t a bad idea at all.

Jeff Miller
BrainTrust

This seems a bit like if a tree falls in the woods and no creature is around to hear it, does it make a sound? I knew they had a subscription business called Starbucks Reserve but did not know or even think to look for a traditional e-commerce store. They never put much effort to marketing it and with this decision, it seems like a victim of priorities. With so many retail locations, expanding grocery and availability through so many e-commerce players, I don’t see them losing many sales with this decision.

However, if they did not have the near universal adoption of the Starbucks app, I would argue that they would lose an important touch point with their customers to speak directly with them via a shopping experience.

Phil Chang
BrainTrust

It sounds like Starbucks in continuing in the quest to make sure their multi-channel efforts are seamless. Applause for that. Companies that iterate to ensure that their online presence reflects their in-store presence and vice versa will continue to win.

I still see so many companies that haven’t figured out that e-commerce isn’t a separate channel and treat it like an account. Those companies should take heed and follow Starbucks’ example above.

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Braintrust
"I think this is a great example of a brand focusing on their strengths and what their customers’ true needs are."
"This move almost rings of exclusivity. You have to come into the store to get the goods. Will it hurt the business? I doubt it."
"It’s always great to see companies move against the grain — against what headline readers would expect."

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