A Major Shift at Starbucks Is Changing Its Personality

Starbucks, once a popular destination for coffee lovers, has evolved into a takeout counter and a place where people can sit down to socialize and connect. Under Howard Schultz, the company aimed to create a welcoming environment for coffee drinkers and employees with comfortable seating, jazz music, and freshly-brewed coffee. Starbucks’ baristas handwrote customers’ names on their drink orders, and the idea of Starbucks as a “third place” between work and home became part of its corporate mythology.

Michelle Eisen, an employee in Buffalo, New York, joined Starbucks in 2010 and has helped lead Starbucks Workers United, a group unionizing company stores. However, Starbucks’ business has transformed, and it has struggled to maintain its identity as that third place. Mobile app and drive-thru orders make up more than 70% of Starbucks’ sales at its approximately 9,500 company-operated stores in the United States. In some stores, customers complained online that Starbucks pulled out comfortable chairs and replaced them with hard wooden stools. Starbucks has also built pickup-only stores without seating and machines that print customers’ names have replaced baristas’ handwriting on cups.

The company’s sales in its home North America market dropped 3% last quarter. Schultz, who stepped down as Starbucks’ CEO (for a third time) and retired from Starbucks’ board of directors last year, wrote a lengthy message on LinkedIn in May about the company’s issues. Starbucks needs to focus on being experiential, not transactional.

Starbucks’ changes to its sit-down business model came in response to several trends, such as demand from customers for ordering coffee from their cars in drive-thru lanes or on their smartphones, the shift from a business serving hot coffee to one in which cold coffees, teas, and lemonades make up more than half of sales, and the Covid-19 pandemic forcing cafes to shut indoor seating. Starbucks also found difficulties with being America’s third place and did not want to become the public space and bathroom for everyone, including people coming into stores who were homeless or struggling with mental health challenges on city streets.

However, by prioritizing speed, Starbucks hurt the appeal of sitting down for coffee in stores, according to Tom Cook, a principal at restaurant consultancy King-Casey who has worked with Starbucks. He said that many Starbucks’ stores feel more like a fast-food restaurant than a coffee shop, and that the brand’s unique image and personality no longer exist.

Starbucks has transitioned from a sit-down shop to a primarily drive-thru and mobile pickup business over the years. The company initially hesitated to build drive-thru stores in the 1990s, fearing they would diminish the third place appeal. However, by 2005, nearly 15% of its 7,300 stores were drive-thru locations. Today, 70% of Starbucks locations have a drive-thru option.

Mobile ordering was another significant step in Starbucks’ shift to becoming a take-away business. In 2014, Starbucks introduced its mobile ordering system, allowing customers to place pickup orders from their smartphones without interaction with an employee. This also provided the company with more data on consumers and pushed them to Starbucks’ loyalty program, benefiting the company as loyalty members are its most profitable customers.

Mobile ordering surged during the Covid-19 pandemic in 2020, with mobile orders jumping from 17% of sales in early 2020 to 26% the following year. However, this has taken away from the sit-down experience, as Starbucks baristas have complained about the crush of additional orders coming in from mobile orders and struggles to keep up with demand. Mobile ordering “commoditized” Starbucks by leading it to focus on order volume and efficiency.

Starbucks’ menu changes also had an impact on this shift. Starbucks is now less of a coffee shop and more of an iced tea, coffee, energy drink, and lemonade store, especially in the summer when nearly 80% of the drinks are cold. Customers are less interested in lingering in an air-conditioned store sipping iced coffee.

In 2022, Starbucks announced it was “reimagining the third place” by investing $450 million in stores with new coffee-making equipment and improving its mobile ordering system. One of these improvements is called the Siren System, designed to cut down the time it takes to make cold drinks. Starbucks is also opening 2,000 new stores, including traditional Starbucks locations, pick-up stores, delivery-only stores, and drive-through-only locations.

To preserve the third place in the digital age, Starbucks should improve ordering on the mobile app for both customers and workers. This means reducing wait times for customers and easing the burden on workers to prepare drinks and acknowledge customers when they come in to pick up their orders.

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