The “Great Human Reconnection” is underway and Starbucks digital DNA is going to be ready to adapt to the new realities of the Vaccine Economy, says CEO Kevin Johnson, bullishly declaring:
Not all markets are moving at the same speed in terms of vaccine distribution, but we know that this is the key that enables all of us to once again be together as part of humanity. And there is no global brand better positioned than Starbucks. Founded 50 years ago, Starbucks was built for this moment.
He justifies his claim by pointing to 5 key characteristics of the coffee giant and its customers that he says have persisted through the pandemic:
Customers crave human connection. They've been longing to be together again face-to-face, feeling part of a community. This is human nature and has always been central to the Starbucks Experience. Second, they are looking for convenient, personalized experiences that effortlessly fit their lifestyle. Third, customers appreciate consistency, knowing what to expect at each visit. Fourth, customers seek out high-quality offerings that support the well-being of the planet and society. And finally, customers are increasingly looking to support brands with strong values, values that are demonstrated by actions.
Not only have we been adapting to and benefiting from these consumer behaviors, but we also see a clear opportunity to further modernize and reinforce our leadership position, leveraging our strength in technology and predictive analytics.
Long-term diginomica readers will know that Starbucks has long been regarded as one of the leaders in digital transformation of its operating model, creating an omni-channel customer experience that has - in the main - set high standards for others to emulate. Johnson points to mobile sales capabilities as a case in point, with mobile platforms now making up over a quarter of the firm’s US transactions:
Our pioneering digital capabilities not only successfully transformed our digital relationships to drive mobile ordering, but also amplify convenience and safety, which are both very much top of mind for our customers. We continue to leverage the advantages of our mobile app to elevate the personalization of the customer experience and deepen customer engagement.
Mobile is a longstanding Starbucks story, of course, but there are more recent bleeding edge innovations worth citing, most notably the firm’s Deep Brew Artificial Intelligence (AI) effort. It was late 2019 when Johnson published a blog on LinkedIn, Can Artificial Intelligence Help Nurture Humanity?, which pitched a vision for how Starbucks would leverage AI. Today he says:
That vision has come to life with Deep Brew, our AI engine that is now used today throughout the company. Deep Brew personalizes the offers and suggestions we make to our customers. Deep Brew has now automated daily inventory, orders across hundreds of US stores as we deploy it broadly. It is supporting partner scheduling and optimizing it in ways that improve both the customer and the partner experience.
Deep Brew drives the pandemic dashboard used by our retail leaders across the US. And Deep Brew is now doing predictive analytics to model vaccination progress in key markets around the world. Our work in AI is providing Starbucks the underlying predictive models, enabling us to fuel the Great Human Reconnection by freeing up partners to do what they do best, connect with customers and deliver a world-class customer experience.
Back to work
If the reconnection that Johnson paints is indeed coming to pass, a critical factor will be the re-opening of workplaces, particularly in urban centers, and the consequent opening up of Starbucks physical stores. Johnson boasts:
Starbucks has always excelled at meeting our customers where they are, even as transactions in the current environment have migrated from dense metro centers to suburbs, and from cafes to drive-throughs.
But changing consumer behaviors have driven a need for rationalization of the real estate and Deep Brew has been at the center of driving what Johnson calls the Americas Trade Area Transformation plan. This has involved both closures of existing properties and the introduction of new physical formats, he says:
In just nine months, we have already completed 70% of strategic store closures, clearing the way for the development of new, innovative and more efficient retail store formats over time. The plan leverages new store formats like Starbucks Pickup in dense metro areas that complement our traditional Starbucks Cafe formats in suburban and rural areas and also enables us to balance continued growth in high-volume and high-margin locations, primarily cafes with drive-thrus.
As the Great Human Reconnection gains momentum and anticipation of behaviors and daily routines continuing to evolve, we are meeting our customers wherever they need us to be with the right store, in the right place and at the right time, yet another key differentiator of the Starbucks brand.
As we celebrate our 50th anniversary throughout this year, we do so knowing that Starbucks' 'Third Place' experience is well established and core to the Great Human Reconnection that has begun. We are a destination for human connection, a warm and welcoming place for all and a place that brings entire communities together, and that is exactly what the world needs, a place that inspires and nurtures the human spirit, one person, one cup and one neighborhood at a time.
The Great Human Reconnection is a nice turn of phrase and suitably aspirational, but it’s going to be very much linked to the success of vaccine roll outs. You don’t have a Vaccine Economy if you don’t have vaccinated people. Starbucks analytics investment seems to be serving it well in determining strategic response here, as Johnson notes that he’s been tracking the return of the ‘Starbucks run’, particularly the morning commute iteration that essentially vanished during the pandemic:
When you look at when the FDA announced emergency approval for the Pfizer vaccine on December 11 and then followed with Moderna on December 18 and then J&J on February 27, sort of mapping the actions taken by the FDA to announce availability of vaccines and correlating that back to watch what's happening in our stores day-to-day, that action alone created this wave of optimism of customers being more mobile. Now, they're still being cautious, but as we saw the rate of vaccinations start to hit 3 million to 4 million vaccinations a day, you really start to see how this Great Human Reconnection unfolds. And we saw it unfold in all day parts.
But inevitably it’s still a case that the more dense urban centers are moving at a slower pace:
We are seeing recovery though in those metropolitan areas. It's just going to take a little longer for businesses to bring employees back to work and sort of re-shift those traffic patterns.
But Johnson remains upbeat:
Clearly, the key is vaccination progress in every country around the world…We’re now using our Deep Brew AI technology to start to monitor and look at the vaccination progress of every country around the world and use predictive analytics to give us a view and a correlation as to how that's going to pace the recovery and the acceleration of our growth in international business.
Clearly, this quarter, we had some COVID-related restrictions in many countries in Europe, certainly in Japan and China, and so that had an impact there. But when you look at the progress we're making on vaccinations, certainly in the US, that's a proxy for what's going to happen around the world. And with vaccine manufacturing ramping up and more vaccine available to international markets, I think we're going to see a good result.
So, get your jab when it’s offered to you and let’s get back to lazy Saturday afternoons reading the newspapers in the local coffee shop.