Although Starbucks CEO Kevin Johnson said Thursday in a letter to employees that he was happy with the chain’s progress over the past two weeks, he warned that until a vaccine was developed and broadly available, consumers would remain cautious.
« We know that after several weeks of lockdown and sheltering-in-place, consumers will seek experiences that are safe, familiar and convenient, » he wrote. « The reopening of our stores in China, the U.S. and elsewhere have confirmed that to be true. »
Over the last week, the chain has regained about 60-65 % of prior-year comparable U.S. store sales while reopening under modified operations and with reduced hours. In China, comparable-store sales have reached about 80 % of prior-year levels.
« We learned in China that when we re-open stores, we begin a recovery process that starts with those safe, familiar and convenient experiences and grows from there, » Johnson said. « Our recovery progresses each week, and we know that it will take time to fully recover and post positive comparable store sales growth. »
For example, Starbucks began reopening a large number of stores in the U.S. in the second week of May and is now tracking slightly above its forecasted recovery curve. The chain launched its summer menu Thursday, a move that Johnson hoped will inspire more customers to visit.
Although he’s pleased with the chain’s progress, Johnson said that the company wasn’t immune to the global pandemic. In order to keep building, the chain is taking three actions: Monitoring and Adapting. 2. Accelerating the plan to transform under-performing stores into mobile locations and 3. Prioritizing employees.
- Monitor and adapt, which is underway, includes reopening stores and recovering the business.
« We are borrowing strongly from our lessons navigating this in China, expanding options for mobile ordering and pick-up, and innovating on our store operations to serve customers responsibly, » Johnson said.
- Accelerate the transformation of the « third place, » which was underway before COVID-19.
« The pandemic has forced consumers to change behaviors by socially distancing, accommodating self-quarantine restrictions and preserving personal safety and well-being, » Johnson said. « Since approximately 80 percent of our store transactions before the crisis were on the go driven in many ways by the use of the Starbucks mobile app, we were already adapting to new consumer trends that balance the need for convenience on-the-go with the desire for connection in our stores. »
The chain’s digital savviness and its ability to transform lower-performing locations and formats to successful new store formats are key.
« The plans we had for this broader store transformation over a three- to five-year period will now occur over the next 12 to 18 months, » according to Johnson, who said this transformation was particularly true in dense metro areas. Over the last two years, the company has studied how customers experience stores in dense markets and have realized that increased mobile pickup orders were crowding stores and reducing the quality of the experience for many customers.
That led to the chain’s creation of the first Starbucks Pickup store that has been operating in Penn Plaza in New York City for the past nine months.
« By blending traditional Starbucks stores in dense markets with these new Starbucks Pickup stores optimized for the mobile order occasion, we not only improve the customer experience for those who want to sit in our store and enjoy their beverage but also create a great experience for those customers who want a convenient way to pick up their beverage on-the-go, « Johnson said.
In addition to more Pickup stores, customers will see more curbside pickup options as well as delivery – all formats optimized for the current crisis and a future of changing consumer expectations for the third place across the U.S.
- Prioritizing employees means preserving as many jobs as possible while ensuring their safety. «
« That’s why we offered comprehensive COVID-19 benefits so every partner would feel truly supported through this crisis, » Johnson said. « We have stood strong, together — ALL of us — and made a commitment to do our part to keep partners’ care front and center as we weather the storm, including enhanced Catastrophe Pay as well as Service Pay for those navigating the many impacts. »
At the beginning of May, thousands of partners took advantage of the chain’s 30-day unpaid leave policy, which allowed those who chose to stay home to keep their jobs and all of their eligible employment benefits through the leave.
Johnson said that the company must acknowledge, however, that many stores will maintain modified operations and reduced hours and will not require the same level of staffing.
« It is important that we are open and honest about the current reality of the COVID-19 economy, and work directly with each partner to ensure they understand the options in front of them whether they choose to stay with Starbucks or choose to pursue a different path, » he wrote.
To help Starbucks partners who choose to stay with the company, the chain is extending the COVID-19 unpaid leave policy through the end of September as an option for those partners who need the safety net of Starbucks benefits and wish to remain a Starbucks partner. This will allow them to access the emergency benefits in which they may be eligible by their state or by Congress through the CARES Act. In addition, Starbucks will cover the health-care premiums for eligible partners for those on COVID-19 leave.
Throughout the pandemic, Johnson said the company’s goal has been to protect customer and partner safety, support local government and health officials while working to exceed guidelines for safety and to show up in a positive way for its communities.
« This much I know is true: connection and community are fundamental to humanity, » he said. « As we gradually come out of isolation, people will continue to crave connection and crave a sense of community.
« So that is our job now: to build a bridge to a future that — yes — will look different, but that stays true to Starbucks mission and values. We will build it together, and it will carry us all to a better tomorrow for Starbucks and the communities we serve. Out of this crisis, just as those of our past, will come lasting progress. I predict that progress, whatever shape it takes, will lead to greater joy in each of us and more sense of community than we’ve ever known. »