Industry experts are perplexed as to how this Seattle-based company will pull off a delivery service. On Thursday, CEO Howard Schultz announced their plans to offer limited food and beverage delivery in select markets in latter half of 2015.
Details of the service have not been revealed, however Starbucks officials claim the delivery option will be tied to its mobile app. This, they are hoping, will ensure customer loyalty.
During a conference call, Schultz said, “Imagine the ability to create a standing order of Starbucks delivered hot or cold to your desk daily. That’s our version of e-commerce…on steroids!”
The confusion for many experts partially resides in the fact that Starbucks prides itself on the sensory theater of coffee – the experience. Delivery would definitely skip that aspect of the Starbucks experience. Christopher Muller, professor at Boston University’s School of Hospitality Administration claims, “Delivery breaks the bond between the customer and the Starbuck’s ‘Third Place.’ Maybe sitting at my desk lost in a Proustian reverie with my coffee is good enough, but the experience is certainly not the same.”
Nevertheless, the decline in retail foot traffic in an Internet era may be the right route to take. Even so, Muller explains there would need to be a relatively high minimum order for delivery to make economic sense for Starbucks. He confidently states, “They can’t make it work at an $8 price point.” Any minimum order below $15 probably would not work.
Executive vice president at Technomic, the restaurant industry consulting firm, Bob Goldin says, “Nothing surprises me, but running up with muffin and Frappuccino for $7 doesn’t seem like it could work economically.” Goldin’s suggestion: the minimum order would probably need to be closer to $25 and limited to office delivery.
The service will be built into Starbucks’ existing mobile app, says Starbucks’ chief digital officer, in a phone interview with USA TODAY.
Starbucks has been working its mobile app to offer pre-orders, allowing customers to order ahead of time and pick up their order without waiting. The pre-order option will first be introduced in Portland before the end of this year.
For the quarter, Starbucks earned $587.9 million, that’s 77 cents per share. Revenue came in at $4.18 billion, short of the $4.24 billion analysts expected.
For the current quarter ending in December, Starbucks forecasts it per-share earnings to range from 79 cents to 81 cents, whereas analysts are expecting 83 cents per share. Shares of Starbucks were down four percent at $74.04.