In a glimpse of when physical retail may pick back up in the U.S., Starbucks said it plans to have most of its domestic company-operated stores open again by early June. However, the Starbucks experience will be a bit different.
Starbucks has temporarily shut around half of its company-run stores and 46% of licensed stores in the U.S. due to the coronavirus, but said it will begin reopening in early May. Barring interruptions, the coffee retail expects around 90% of company-operated stores reopened by early June with modified schedules.
CEO Kevin Johnson said the company is leveraging digital tools to monitor the COVID-19 situation in every community across the U.S. The retailer will “thoughtfully reopen stores and scale up operations” utilizing a variety of fulfillment options, including contactless service, a new entryway pickup option, curbside delivery where parking is available, and at home delivery.
“We are finding new innovative ways to serve our communities, prioritizing the safety of our customers and partners, with a focus on exceeding public health standards and adjusting to new customer expectations,” Johnson said during the retailer’s earnings call.
“Our monitoring capability provides the input necessary for decisions that enable us to turn the dial up or down depending on the situation in a specific community, or a specific store,” he continued.
Starbucks’ global same-store sales fell 10% amid a 13% decline in transactions in its second quarter ended March 29. In the first 10 weeks of the quarter, the U.S. delivered 8% comp sales growth, yet the growth was more than offset by a sharp decline in the final three weeks of the quarter due to the COVID-19 impact. In the end, U.S. comp sales dipped 3% for the quarter, driven by a 7% decrease in comparable transactions, which was partially offset by a 5% average ticket growth as group ordering picked up from customers making Starbucks runs for full homes, local essential businesses and frontline response teams.
Starbucks Stores Reopen
As stores begin to reopen next week, it won’t be business as usual. Operating modifications will include drive-through stores, amplified delivery, and the addition of a new concept, the entryway handoff. Mobile Order & Pay channels will be open for ordering and customers will need to order ahead to pickup through drive-through, curbside or the entryway.
Starbucks plans only around 30 stores that will be “cafe open and order” and there will be no seating for customers inside those stores.
“We are making sure that we provide a safe environment for our customers and for our partners,” Roz Brewer, COO & group president, Americas, said. “And we will monitor what happens as shelter-in is lifted in certain regions and areas, and then begin to reopen the cafe stores. You'll see later in the summer, we'll also add curbside access to our stores.”
Additionally, Starbucks will implement employee pre-checks with thermometers available in all stores. Every employee will take their temperature and then validate if they're ready to work through a series of questions.
“Pre-COVID, 80% of our customer occasions in stores in the U.S. were for to-go take-away,” Johnson noted. “And so, by augmenting the in-store experience with mobile ordering and contactless pickup, we can service significant volume of customers without having the cafe seating area actually opened.”
While Starbucks has always spoke of its cafes as being the “third place” for community connection, as shelter-in-place orders lift, it remains to be seen if consumers will return to public gathering situations.
In China, 83% of Starbucks stores that are open have seating with social distancing in place, said John Culver, group president, International, Channel Development & Global Coffee and Tea.
“We are seeing people come back into the cafes and sit there, albeit not to the levels that we saw pre-COVID,” he said. “What we're seeing is that there is a higher percentage of to-go orders taking place in China and we expect that trend to continue. And, if there is a silver lining, I think it is forming a new habit in China, where you are seeing more people take to-go orders and get used to doing that.
“And so we're optimistic that the shift will continue to occur. We anticipate the 80% of where we were pre-COVID will come back, maybe not as high, but the overall sales levels that we'll see in China, we will get back to full recovery and on a path to full recovery by the end of this fiscal year.”