One of the key problems facing Starbucks, as highlighted by investors and executives, is the operational issues that have resulted in declining sales over recent quarters. The rise of mobile orders, accounting for roughly one-third of the total sales, has created chaos in stores, with frustrated customers and overwhelmed baristas. Former CEO Howard Schultz has even referred to the mobile app as the biggest Achilles heel for Starbucks, emphasizing that the issue lies within the store itself. The complexity of mobile orders, with various add-ons like cold foam and syrups, takes up more time, leading to longer wait times and displeased customers.
Brian Niccol, the incoming CEO of Starbucks, faces the crucial task of addressing the mobile order problem when he assumes the role in September. Niccol’s challenge lies in reducing crowding at Starbucks by making mobile orders more efficient. With the shift towards increased reliance on mobile ordering, Starbucks has lost its reputation as a “third place” between work and home, where customers could linger and enjoy their beverages. The convenience of mobile ordering has altered consumer behavior, and Starbucks failed to anticipate and adapt to this change effectively.
The succession of leadership changes at Starbucks has also contributed to the current challenges facing the company. Kevin Johnson, who took over as CEO from Schultz, focused on investing in technology and digital sales growth. However, operational struggles persisted, leading to Schultz’s return as interim CEO in 2022. The failure to foresee the impact of technological advancements, particularly the mobile app, on operations resulted in missed opportunities and reduced efficiency.
Addressing Barista Burnout and Unionization
The pressure on baristas due to the surge in digital orders has led to issues of burnout and employee dissatisfaction. The introduction of mobile ordering promotions further exacerbated the problem, prompting some employees to unionize. Starbucks Workers United called for measures to address the impact of mobile orders on in-store operations, suggesting the need to disable mobile ordering during peak times or promotions.
In contrast to Starbucks, Chipotle has successfully managed the rise in digital orders, with online sales contributing significantly to the company’s revenue. Brian Niccol’s tenure at Chipotle saw the implementation of strategies to boost digital sales, such as introducing promotions, a rewards program, and digital-exclusive menu items like quesadillas. Chipotle’s proactive approach, including the installation of dedicated prep lines for digital orders and the introduction of drive-thru lanes for online pickups, showcases the importance of anticipating and adapting to changing consumer preferences.
Proposed Solutions and Challenges
Starbucks has taken steps to improve its service and barista experience, including the introduction of new equipment and processes to speed up service. However, the slow rollout of new machines across North American locations poses a challenge in achieving the desired reduction in service times. Brian Niccol’s credibility and ability to communicate his strategies effectively will be crucial in gaining investor confidence and addressing the mobile order problem effectively. Time, training, and investment will be required to implement more drastic measures, such as accelerating the equipment rollout, to alleviate the strain on baristas and improve overall efficiency.