With the recent news coming out about the famous coffee business planning to deliver, many are wondering if CEO Howard Schultz’s plan to gain profits will work, as he works on providing the company with a new service. Though many Starbucks fans have now heard that coffee and snacks can be delivered straight to their doors, business gurus are wondering if it will be worth the price. Though Starbucks coffee is some of the highest priced java in the nation, most places that deliver charge at least $2.50, if not more. So who would be willing to pay an extra few dollars just to have their coffee brought to them rather than having to take the trip to get it?
Starbucks has really been whipping out the big guns lately. It started as they began announcing new and different improvements throughout the company to change things up. They first took a look at the employee handbook to see what changes they could make to make their employees more comfortable while working. Things like allowing them to wear piercings and scarves, wearing more lenient clothing, and even giving them a pay raise and a free pastry while on shift really perked up their feelings towards their employer. Then they announced the “win coffee for life” contest in which everyone who grabs a gift card can win drinks of their choice daily for 30 years. This was all in effort to make the holidays a brighter time for the always busy coffee business, and it did seem to work well, so far.
But unfortunately Starbucks is still not seeing as much of an improvement as they hope to get by the end of the next quarter. In the past Starbucks has had a bit slower end quarter in the year. CEO Howard Schultz says this is because they see people buying gifts online and worrying about holiday shopping, rather than necessarily worrying about warming up with a coffee (though they do still stay busy during the holiday season). So Schultz came up with a plan that he hopes will combat any down-sized quarters, as he decided that the company needed to be “playing offense” instead.
So what was his genius idea to get the bucks rolling in on coffee and pastries? Simple – deliver them to customers. Schultz hopes that they can introduce the service at the beginning of the year and even introduce an online ordering process so that people can technically ‘shop online’ or order by mobile app. But will this idea of Schultz’s bring in more revenue for Starbucks?
Companies that offer delivery can usually double their revenue as more people have taken to ordering in rather than going out. However, Starbucks has a drive-up in which people, while on their way to work, meetings, play dates, etc., can simply stop by the side of the building, order their coffee, pay, collect, and leave. For many years the drive-up has worked well for the company. As well, many people take their laptops with them and choose to go to Starbucks as they do their work, schoolwork, or even just browse the internet, bringing in another large amount of customers. However, those companies that normally provide delivery as a service, charge a hefty amount to have the luxury. If the coffee company charges as much as they would need to hire drivers, buy some type of equipment to keep the coffee warm, and charge enough to make revenue on top of it all, would people use the delivery service?
Though Starbucks only missed their Wall Street expectations for fourth quarter revenue by a small percent, they are making large plans to bring in even more revenue, but if their plan is not completely solid it may end up being a bust. However, as CEO of one of the largest coffee chains in the world, Howard Schultz probably has some idea of what he is doing. In his discussions about the plan it seemed like his target was major businesses, and companies who would order a large order for an “army of workers.”
Whether he is going after big fish or individual coffee lovers, Starbucks has got some things up its sleeve. It is only a matter of time until business gurus can see if introducing delivery will bring in the big bucks for the company.
Opinion by Crystal Boulware
Image by Ferre Dollar