TLDR;
This video explores the economics of Starbucks, highlighting its evolution from a small Seattle cafe to a global coffee giant. It examines the company's innovative use of technology, particularly its mobile app and gift card system, which functions similarly to a bank. The video also discusses Starbucks' diverse menu, store models, and the company's values and culture, including its relationship with employees and recent unionization efforts.
- Starbucks' mobile app and gift cards hold billions in customer funds, functioning like a bank.
- Technology, especially the mobile app, plays a crucial role in Starbucks' business model and data collection.
- The company emphasizes its values and culture, referring to employees as "partners" and offering company shares.
Starbucks operates like a bank [0:00]
Starbucks holds a significant amount of customer money through its mobile app and gift cards. The amount, around $3 billion between October and December, is so substantial that if Starbucks were a bank, it would rank among the largest in the United States. Starbucks can use this money upfront as revenue before customers even make a purchase. While this money represents a liability, many customers never fully use their gift cards, further benefiting Starbucks.
Starbucks’s history and menu [0:52]
Founded in Seattle in 1971, Starbucks has grown into a global coffee powerhouse, second only to McDonald's in market capitalization within the restaurant industry. The company expanded slowly until Howard Schultz took over in 1987, introducing espresso and expanding beyond Seattle. Starbucks prides itself on hand-crafted beverages, offering over 170,000 different drink varieties. Signature drinks like the Frappuccino and Pumpkin Spice Latte have become global phenomena, and cold beverages are increasingly important to the company's revenue.
Starbucks’s technology [2:59]
Technology has been a key factor in Starbucks' dominance, particularly with the introduction of its mobile app in 2009. By the end of 2021, mobile orders accounted for nearly a quarter of all U.S. transactions. Starbucks cards are used in 44% of all transactions. The company holds approximately $2.4 billion in customer-uploaded funds. This system allows Starbucks to gather extensive customer data, creating a unique ecosystem where customers are engaged through the app and mobile ordering.
Store models [4:16]
As mobile payments have increased, Starbucks' business priorities have shifted. Before the pandemic, about 80% of U.S. transactions were on-the-go, either through drive-throughs or mobile orders. While Starbucks began in cities, it has expanded into suburban areas, largely through drive-through locations. These alternative pickup options have become increasingly important, especially during the pandemic, providing a lifeline for the company as customers could easily pick up orders without entering the cafe.
Culture and values [4:49]
Starbucks emphasizes its commitment to values established early in its history, aiming to create a connection between baristas and customers, even in drive-through settings. The company monitors customer connection scores to ensure a positive experience. Store designs are carefully choreographed to create a consistent feel. Starbucks refers to its employees as "partners" and offers them shares in the company through a program called Beanstalk. However, recent unionization efforts at some stores have challenged this relationship, with Starbucks expressing a desire to maintain a direct connection with its workers and viewing unions as intermediaries. Despite these challenges, Starbucks states that its success is built on partnering together with its mission and values at its core, and it believes it is better without a union between them.
