Starbucks Corp. plans to pull the plug on its e-commerce site on Oct. 1.
The end of direct-to-consumer online sales by Starbucks, No. 462 in the Internet Retailer 2017 Top 500, is designed to shift more of Starbucks’ resources toward its stores and mobile app. Starbucks declined to say whether it is laying anyone off as a result of this. The e-commerce site generated roughly $42.0 million in online sales last year, according to Internet Retailer estimates. That’s a tiny sliver for a company with $21.316 billion in revenue in fiscal 2016.
“Continued integration of digital and mobile customer connections into our store experience is among the highest priorities for us, and to enhance that focus we’ve looked for ways to simplify our current efforts,” a Starbucks spokeswoman says.
Shoppers will still be able to buy Starbucks coffee, mugs and other products online through online marketplaces and other retailers’ sites, just not through store.starbucks.com. A link on its website states “Store.Starbucks.com is going away.* Shop online through October 1st.” The link takes shoppers to a sale page, which notes that it will stop taking orders as of 11:59 p.m. Pacific time Oct. 1.
Key to the company’s future will be what the coffee giant calls its “digital flywheel,” which includes its mobile app and its Starbucks Rewards loyalty program, and integrating mobile and digital technology in with its store locations, the spokeswoman says.
“Our digital flywheel is a powerful proprietary asset that is driving deep customer engagement, revenue and profit growth around the world, and we’re pleased with the contributions that our digital flywheel made to our business in Q3,” Starbucks CEO Kevin Johnson told analysts on Starbucks’ third quarter 2017 earnings call in July, according to a transcript from Seeking Alpha.
One of the most important pieces of this strategy is improving relationships with members of its free Starbucks Rewards program. At the end of Starbucks’ fiscal third quarter, which concluded July 2, Starbucks said it has 13.3 million active Starbucks Rewards members who accounted for 36% of the company’s sales.
Mobile payments also account for a growing percentage of sales in Starbucks stores. Shoppers can pay for their orders in store using the Starbucks mobile app on their smartphones. Starbucks reported that shoppers using mobile devices to pay for their orders accounted for 30% of transactions in its U.S. company-operated stores.
Meanwhile, shoppers who opt to place their order and pay for it via their mobile devices through Starbucks’ Mobile Order and Pay offering accounted for 9% of all transactions in Starbucks’ U.S. company-operated store locations.
“Mobile ordering remained highly incremental, resulting in many more occasions per customer than would be the case otherwise because the convenience encourages more on-the-go visits,” Starbucks global chief strategy offer Matthew Ryan said.
Part of Starbucks’ move to incorporate more digital and mobile elements with its stores is driven not by other coffee shops or restaurants, but by the likes of Amazon.com Inc. (No. 1) and Walmart (No. 3).
“The evidence is clear that the pace of retail transformation is accelerating with a common theme: extending the in-store experiences to include relevant digital scenarios,” Johnson said in July. “It is the driving force behind combinations including Walmart’s acquisition of Jet.com, the combination of PetSmart and Chewy.com, and last month’s announcement of Amazon’s intent to acquire Whole Foods. Each of these combinations demonstrate that pursuit of enhancing the physical retail experience with a relevant and complementary digital experience.”
“We’re in the nascent stage of these kinds of commercial relationships that are going to elevate the experience of a brick-and-mortar retail company,” added Starbucks executive chairman Howard Schultz. “Having said that, Starbucks is probably best positioned—given our national footprint, the demography of our customers, and where we’re located—to have those kinds of conversations.”