Does Starbucks have a big delivery opportunity?

Discussion
Photo: Starbucks
Dec 14, 2018
Tom Ryan

At its investor day on Thursday, Starbucks said that, in a partnership with Uber Eats, the chain will roll out home delivery to nearly one-quarter of company-owned stores in the U.S. by the end of the second quarter.

Starbucks has been exploring delivery for years and tested a program in Seattle in 2015 with Postmates. The renewed push comes as McDonald’s recently partnered on delivery with Uber Eats. Yum Brands, owner of Taco Bell, KFC and Pizza Hut, has partnered with Grubhub on delivery as well.

Starbucks Delivers program launched three months ago in China with the promise of delivery of hot and cold drinks within 30 minutes or less. Done in partnership with Ele.me, the delivery unit of Alibaba, and its three million registered delivery riders, the program has reached 2,000 stores across 30 cities in China.

Starbucks has further pilots underway in both Tokyo and Miami with Uber Eats.

For the China rollout, Starbucks created spill-proof lids, tamper-proof packaging and containers that support hot and cold items. Starbucks CEO Kevin Johnson told CNBC that some drinks may be unsuitable for delivery, such as a cappuccino, because of likely foam overspill. Mr. Johnson said, “We were very thoughtful about this.”

The launch comes as Starbucks is facing slowing traffic to its domestic stores.

Writing for the Wall Street Journal, Julie Jargon noted that, although many chains say delivery reaches customers who don’t want to dine out, delivery fees on small orders can irritate consumers. She also said Starbucks may be challenged delivering “quickly and while still hot — something that could be particularly problematic for coffee.”

DISCUSSION QUESTIONS: Do consumers want coffee to be delivered to their homes and offices? Will the biggest challenge for Starbucks likely be more about executing delivery or stimulating demand?

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Braintrust
"I think this is a nice extension of Starbucks 'life.'"
"A big opportunity? I’m not convinced. There may be an opportunity, but only in certain circumstances."
"I’m sitting at Starbucks right now. After reading the discussion topic, I am thinking why would anyone want Starbucks delivery?"

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34 Comments on "Does Starbucks have a big delivery opportunity?"


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Art Suriano
BrainTrust
I don’t know that I see this as a huge success. Today with Keurigs in most homes and offices, coffee is not as hard to have “now” as it used to be. Granted Starbucks has a loyal following, and most Keurigs are not going to offer the sophisticated options Starbucks provides but how can this be profitable? Unless a group of office workers put in a big order, most likely the delivery charges will be as much as the coffee, if not more. Moreover, it’s challenging for Starbucks to manage this. It’s true their traffic is down, but I believe the reason is that the younger people of today realize how expensive Starbucks is and many of them do not feel it’s worth it. Plus, many young people today are not drinking coffee. So rather than focusing on delivery, I think Starbucks would best be served to look at their overall business model and see how they can re-invent their brand with less expensive items and more appeal to those currently not shopping them.
Ian Percy
BrainTrust

You’re a wise man Art! Good advice. Starbucks will soon realize that you can’t fool all the people all of the time!

Tony Orlando
BrainTrust

I totally agree. Are we that lazy that we can’t pour a cup of coffee?
Food I get, with some exceptions, but unless they are adding to fresh baked goods with the coffees, it won’t attract a huge following. Starbucks for my wife is a treat to chill out in a mall, or on vacation. To have it delivered who knows, but I don’t see this as a huge boost to the bottom line. The coffee is expensive enough, plus the up charge, so we’ll see.

Neil Saunders
BrainTrust

Delivery is a good idea, especially to offices and workplaces. However, delivering drinks quickly and while still hot might be a challenge.

Though the biggest potential problem is coping with the additional orders. Traffic to Starbucks stores might be slowing but wait times are often poor, especially during peak periods. Starbucks has to find a way of managing increased volume without damaging customer service.

Ian Percy
BrainTrust

“We were very thoughtful about this.” Oh come on Starbucks. I’m sorry, but when I can get “Starbucks Coffee” beans at Costco (and IMHO there is better and cheaper coffee) and have a whole fresh hot pot of it at a fraction of the cost in my own home…why on earth would I want someone to drive it to my house at even greater cost, throwing away all the packaging an hour later, and all for one cup? This country has gone mad!

Art Suriano
BrainTrust

I couldn’t agree more…spot on!

Ryan Mathews
BrainTrust
Not to mention the temperature issue. Even considering things like thermoses, warmers, insulation packs, etc., the coffee would either have to start its journey being heated to too high a temperature or arrive not quite hot enough. I often stand behind hipsters in my local Starbucks who order their lattes at a specific temperature. Of course they get it at the same temperature everyone else does, but they think it has been custom-brewed just for them. And these are the kind of folks that would stick a thermometer into the coffee and reject it if it has had a degree too hot or cold. Even the idea of delivering en masse to an office hasn’t been thought through. When was the last time you were in a large corporate office — or a small office for that matter — that didn’t have one or more coffee stations, a kitchen or a foodservice area? So … if it makes no sense for an individual, and it makes no sense in a corporate setting — well …… Read more »
Lee Kent
BrainTrust

Absolutely!

Ray Riley
BrainTrust

Is it the normal $2.50 delivery fee? I can tell you there are plenty of folks in my generation (in cities) that order Uber Eats or Grubhub from food outlets that are a stone’s throw from their condo or apartment. I’m curious to know the delivery fee (Uber Eats standard $2.50-$3.50?), but I don’t see coffee being any different pending the product arriving in the optimum condition.

Joel Rubinson
BrainTrust

Starbucks must do this to stay relevant to the way that shopping is going. More online buying, more virtual working, less foot traffic to come in off the street. I’m sure this will be more than just delivering coffee and will include food. Morning meetings, Friday morning treats for the office, friends coming over for brunch — I think this is a nice extension of Starbucks “life.”

Bob Amster
BrainTrust

Starbucks delivery is a push. It might work for the non-coffee items it sells but I can’t see paying delivery fees as a consumer to get a cup of coffee. Pizza, hamburgers, fried chicken, Chinese? Yes! Coffee? No!

Chris Petersen, PhD.
BrainTrust

Have you ever been in a business meeting with Starbucks delivered in a box? I have several times and it’s definitely NOT the same experience or anything that tastes like the same coffee. HUGE quality delivery problems. Not to mention cost. The $5 coffee just went to $7 or $8.

Steve Montgomery
BrainTrust

Customer may want Starbucks to deliver their coffee, but unless they have found a way to keep it hot the customer will not be happy with what they receive. No cup on the market today will keep coffee hot for 30 minutes. To keep coffee drinkably hot you would need to have it in a thermos type of container such as a Contigo or other brand.

I have not seen, nor am I ever likely to see, the container referenced in the article but having been in the c-store industry as a retailer and now as a consultant I can tell you people are very particular about the hand and mouth feel of their coffee cups. I see the announcement as a way to for Starbucks to say “hey we deliver too,” but I don’t see it having any significant impact on their sales.

Cynthia Holcomb
BrainTrust

A cup of Starbucks delivered at home? At the office? Out of occasional desperation, possibly. It seems wasteful for both humans and the environment. Not to mention constant Starbucks price increases.

Gene Detroyer
BrainTrust

I’m sitting at Starbucks right now. After reading the discussion topic, I am thinking why would anyone want Starbucks delivery? I am a really big coffee drinker (maybe a dozen or more cups a day). I am a really big Starbucks fan and I like their coffee. But, delivery?

As several of my colleagues pointed out, If I want coffee at home I can make excellent coffee. Get it immediately. And have it at a much lower cost.

I go to Starbucks to be in the store. To sit, relax, and spend time on RetailWire. I watch others come in and get their coffee on their way to work or to get out of the office for an afternoon break.

The Starbucks mantra “Creating a culture of warmth and belonging, where everyone is welcome” doesn’t include delivery nor is it the thought Howard Schultz started the company with.

As for looking at becoming more than the ubiquitous McDonald’s or DD, check this out.

Ricardo Belmar
BrainTrust

Having been to the Starbucks Reserve Roastery in Seattle, I am looking forward to checking out the NY edition. Yes, this may well be the ultimate expression of a coffee lifestyle! Where else will you get a $12 cold brew aged in whiskey barrels! (Yes it really does have a unique flavor for those who haven’t tried it!). The concept is brilliant, but I have to say if every Starbucks were turned into one of these, it would lose its appeal. The uniqueness creates a sense of intrigue from the rarity of the location and the experience that results is much more memorable that way.

Gene Detroyer
BrainTrust

I walked by the Roastery in Chelsea the other afternoon and there was a line waiting to get in.

Lee Peterson
BrainTrust

Oh, save us from more caffeine! This is SO going to work. Starbucks will proliferate even more than they have now. But on the dark side (can’t help it), is anyone else waiting for the “caffeine is bad for you” hammer to drop?

My doctor told me that one cup (actual cup) of coffee a day is not bad for anyone. Two cups; depends on the person’s chemistry. And three cups (just short of a Venti) a day is too much for anyone and not healthy. Given that, I know people who drink at least two huge coffees a day in one form or another. Lots of them, actually. The term “everything in moderation” doesn’t really apply to Americans, does it? Look out below. Question: Is caffeine in the 2020s what cigarettes were in the 1950s?

Anyway, just throwing that out there to see how many “thumbs downs” I’ll get. 🙂

Gene Detroyer
BrainTrust

After two Ventis at Starbucks, I go home and take a nap.

Ricardo Belmar
BrainTrust

Gene, sign us both up for the “coffee has no effect on me” club! Although you have me beat on the coffee cup count per day!

Lee Peterson
BrainTrust

You guys are addicts! Your tolerance is so high it has no effect on you — I once saw someone ask Andrew Weil if he drank coffee. His reply was, “I don’t do hard drugs.”

Sid K. Hasan
Guest

I’m on the fence — I still enjoy the physical Starbucks experience. Why not focus on bringing me and my associates back in?

The affiliate (driver) opportunity could be a stepping stone for Starbucks — gaining last mile touch-points is valuable.

Apple Pay + Apple Watch = innovation which gets us closer to never going into our pockets or pocketbook.

I think the Starbucks and Uber Eats deal is a chess move which pays off much farther down the board.

Ed Rosenbaum
BrainTrust

Starbucks is to coffee what Amazon is to everything else you could possibly want. One difference is Amazon delivers tomorrow and Starbucks has to figure out how to deliver in minutes. When I first read this I thought it was not something needed or possible. But then I thought about this being about Starbucks and its cult following. The determiner to success with this program is not going to be what Starbucks does to get the coffee delivered timely and inexpensively; but how the customer responds to it. Someone is going to have to pay for the delivery costs. I doubt it will be Starbucks. China has many delivery people that ride bicycles. That is not going to happen here.

Peter Charness
BrainTrust

Really? I guess this will work for some people. How hard is it to get up and walk to your nearest Starbucks? With all this “never leave my house and never get out and walk around” convenience, there’s got to be a crowd out there for whom I think the next delivery need will be treadmills! Here’s an idea: a time share for a treadmill ownership. Customers can book it online and use it for a scheduled hour a day. You pick it up and deliver it to the next Grubhubber/Uber Eater in need of some exercise. Who’s in on this one with me?

Shep Hyken
BrainTrust

I can’t imagine there’s much margin in delivering a hot cup of coffee a mile away. Is Starbucks willing to charge the fee to cover the cost, if not eliminate a loss, on a delivery? Consumers want convenience, and are willing to pay for it. So the goal is for Starbucks to find the balance of what works.

Harley Feldman
BrainTrust

Individual cups of coffee will be a challenge for delivery for several reasons: the foam issue mentioned, keeping the coffee hot, and the fee that will be charged for the delivery. These are difficult problems to overcome; coffee will be a challenging category for delivery. Carafes for several people would be a more likely delivery item assuming everyone at the delivery location would want the same item. Starbucks’ biggest challenge is more about stimulating demand with the delivery problems mentioned above. Uber Eats will be solving delivery issues for all of its clients with or without Starbucks..

Jasmine Glasheen
Staff

I worked in an office with a Keurig and bought Starbucks whenever I had enough time to wait in the 15-minute line. Why? Keurigs are notoriously unsanitary— especially in an office setting where the elusive “someone” takes responsibility for cleaning it.

Starbucks delivery willl be the perfect way for CEOs to reward their teams, or for office workers to come together and self-treat on a Monday. It’s not “laziness,” but it’s the antitdote to trying to navigate long lines and wait times on a tight corporate schedule.

Sid K. Hasan
Guest

Well said.

David Naumann
BrainTrust

I am sure there are some people that want coffee delivered to their home or offices, but I think the demand is low for this. The exception is when you are making a big order for a group of people or for a meeting, when a box of coffee often makes more sense.

Delivery execution and stimulating demand are equally as challenging. While it is good to offer consumers choices and options, I think there are better things for Starbucks to focus on, like faster service. Long lines inside and in the drive-thru is a bigger challenge for Starbucks.

Bob Phibbs
BrainTrust

Starbucks knows their customer well. They know that customers value convenience over anything else, including price […] It should be a lesson to their lower-priced competitors, such as McDonald’s and Dunkin’, that convenience is always going to win more customers than price. hashtag#retail hashtag#starbucks hashtag#uber hashtag#custserv

Cate Trotter
BrainTrust

A big opportunity? I’m not convinced. There may be an opportunity, but only in certain circumstances. For the average person it’s hard to think of a time where paying for a Starbucks coffee to be delivered (with all of the temperature and quality and price concerns that brings up), is a better deal than making one at home/work or going into the store directly. Maybe for a team meeting it might be something you’d consider as it makes the cost of delivery more palatable.

As noted in the piece, the challenge here is to make delivery make sense for a relatively low spend purchase (not to mention the fact that we’re talking about something that doesn’t necessarily travel well). People don’t want to pay half the value of the coffee again for delivery. I can understand why Starbucks feels it needs to explore this avenue, but I don’t expect it to be a particularly fruitful one.

James Tenser
BrainTrust

I like Uber Eats and I like Starbucks, but I can’t reckon paying the delivery cost for cups of coffee. The packaging waste bothers me too. Then as others mention here, the temperature issue could be a hangup.

Starbucks certainly has reason to offer its products in any and every way its customers desire. I think its decision to partner with a third party tells the tale: If it thought this had truly big potential, Starbucks would create its own delivery service and keep more of the margin.

Ricardo Belmar
BrainTrust

Delivery is becoming pervasive in just about every product category, so why not coffee? Yes, there are unique challenges in delivering a quality coffee product, but if Starbucks is willing to see this “experiment” though I have no doubt they will find a way to make it work. The question is — will it be a profitable approach? Delivery costs more and at some point, customers will look at the premium they are paying for delivery over and above the premium they are paying for the product and some may finally say enough is enough! Starbucks will need to determine just how large a customer segment it is that wants coffee delivery. I suspect they have plenty of loyal fans that would make this worthwhile although perhaps not at all locations.

Phil Rubin
BrainTrust
2 months 5 days ago

Starbucks has struggled and hasn’t innovated since MOPIS. It’s hard to see how this is going to make a material impact in its business but presumably their test was informative and a reason to make the investment. The quality and value proposition of a Nespresso machine versus Starbucks Coffee delivered, at least for me, is clear but like so many other things, the diversity of customer wants and needs makes a market, Beyond group orders, it’s hard to see the economics of this favorably given the costs and pricing around delivery.

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Braintrust
"I think this is a nice extension of Starbucks 'life.'"
"A big opportunity? I’m not convinced. There may be an opportunity, but only in certain circumstances."
"I’m sitting at Starbucks right now. After reading the discussion topic, I am thinking why would anyone want Starbucks delivery?"

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