Starbucks CX Point-of-Sale Challenge: Intro
I am not a coffee drinker, but I generally like the Starbucks brand from the business development (and the tenant-patron) perspective. As we know, three things matter in real estate – location, location, and location. Starbucks has done exceptionally well from the legacy retail standpoint: it has all the right locations to lure you inside. But when it comes to its tenant and customer experience, there may be room for improvement. I was “there” to see Starbucks become an American landmark of the worldwide coffee culture. Even if you are not in love with Starbucks coffee, chances are that you go to a Starbucks store every now and then – to use the free internet, to buy a bottle of water, or just because your friends decided to meet there before going to a concert. What can go wrong at a Starbucks in terms of tenant experience and retail customer experience? Or for that matter, how could you improve Starbucks point-of-sale systems to improve its overall CX and its global customer success?
The problem at hand has to do with ordering frozen Starbucks items such as sandwiches, wraps and quiches – not the ones that sit in the public-facing cooler, but the ones shown on the display behind glass and require a barista or a point-of-sale clerk to get one from somewhere behind the counter. When your in-store interaction takes place early in the morning, all is peachy because everything is in stock. But shortly after 10am, this changes, at which point inventories dwindle and the main way to find out if what you want is in stock is to get the clerk to shout across the room to ask someone else or to leave the register, walk over to the refrigerator, open the door, let some warm air inside, dig through several shelves of items to see if your item is physically present and, finally, come back and complete the order. How does this affect Starbucks customer experience? And how does Starbucks need to change this model if it is serious about selling you a great lunch or dinner? And for that matter, is Starbucks really competing with Mickey D’s for your lunch or dinner burger dollars?
And finally, CX aside, can we financially justify making tweaks to Starbucks point-of-sale systems to improve inventory tracking? Let’s talk about these fun things. And for those of you who share my respect for the Starbucks brand, let’s hope that the company is already working on a reliable fix.
Really? Starbucks v. McDonalds: a New Perspective
Let’s get the obvious out of the way: whether Starbucks strategic business executives are willing to admit it or not, Starbucks is slowly but surely moving into the fast-food business – presumably the fancier end of the spectrum thereof, but still – and is competing with the others in this domain. Let’s face it: the introduction of Starbucks food items beyond their traditional pastries was a strategic move intended to get more customers to spend more money at Starbucks – money that they otherwise would spend on a Big Mac or on a Spicy Chicken Sandwich and some Curly Fries from Jack in the Box. This may sound blunt, but in marketing and economics, Starbucks would be called a “substitute good” for McDonalds, for example.
There are good signs that Starbucks wants your daily meal allowances. One is an increase in inventory; check. Another is an increase in variety; check. Another is an increase in freshness and availability of food warming equipment; check. Finally, there should be a trend toward larger portions within any category, such as larger sandwiches and cookies; check – for example, the Starbucks biscotti went from 90 calories to about 200 calories, while their average sandwich size grew from under 400 calories in 2014 to over 550 calories in 2018.
With that in mind, I would want to see Starbucks get better at handling its orders and managing its inventory. But notice what happens when you order a sandwich or a pie that’s not in stock the next time you are at the drive-through intercom or at the counter of a well-established food chain store (e.g., McDonalds): immediately, the point-of-sale clerk will tell you – without a shadow of a doubt – that the product is out of stock. And if they fail, they will certainly tell you at some point before they actually take your money at the pickup window. Logical? You bet it is. It is easy and simple – because the McDonalds point-of-sale user interface, for example, tells the clerk how many sandwiches they have in stock (whoa, you can track that?); and the only time the clerk needs to physically go back to the kitchen to check stock is when the stock quantity on the screen is 3 units or less. That’s how Starbucks competition does it. Enough said. Now, back to the topic.
Starbucks Customer Experience: Worst Case Scenario
From the customer experience perspective, there is only one thing worse inside a Starbucks store than having an item on the menu but not having it in stock: that “thing” is having the item on the menu, processing the customer’s order, taking the money from the customer, making him or her wait for a minute or two, and then telling that customer that the item is out of stock and having to issue a refund or to get the customer to change his/her order to another item (which, by the way, is technically known as ‘Bait and Switch’ and is – well, sorry Starbucks! – technically illegal in every state and in many countries across the world. This is how we did it in the 20th century, and I can’t think of any logistical or strategic reason to keep doing it in today’s age of technology.
Starbucks Customer Experience (CX) Problem Defined
Clearly, this discussion is not about basic issues that can affect just-about any coffee shop – e.g., a broken espresso machine, a clerk who forgets to write ‘decaf’ on your cup or to wash hands after using the bathroom. We are talking about a Starbucks point-of-sale clerk who takes your money for a refrigerated item that is stored away from the clerk’s counter, gives you a receipt, tells you to have a nice day, and then (or I should say “and only then”), a minute or two later, another person from behind the counter proclaims that the item you ordered is not in stock and offers you a refund or a substitute item. Apart from all practical inferences, you feel awkward; the people standing in line and observing this also feel awkward; likely (and hopefully), at least one person behind the counter also feels awkward. Are you OK with this customer experience? But wait – let’s be reasonable and give them some slack: Starbucks has just started selling sandwiches and wraps, and it must be OK that they still haven’t polished their act. Or is it? Are you aware that Starbucks started selling sandwiches over 10 years ago?
Let’s rephrase: Starbucks employs hundreds of business analysts, engineers, as well as customer experience and user experience specialists working day and night to make sure that its retail point-of-sale systems are usable and to make sure that your next Starbucks visit is nothing short of awesome, but none of these people understands the devastating effects of poor customer experience on the company’s performance. Already then. Am I missing something?
Starbucks CX, Man-hours… and My Own Story
I have been buying the Starbucks Artisan Sandwiches since their debut circa 2008 until current time. They used to be small 300-to-400-calorie sandwiches but are now becoming exceedingly bigger (450-600 calories), as Starbucks is taking strides toward competing in the fast-food market (more about that below); to me these sandwiches represent a quick, light lunch, which is what you need when you travel a lot. So, during nine consecutive months in 2017, I tracked my Starbucks visits, with an average of 7.5 Starbucks visits per month. My statistics show that, on average, 32% of the time the sandwich I ordered was out of stock, which is OK, technically, since my favorite sandwich is a popular one and since I always order it after 11am. But the process of finding out that my sandwich is out of stock is often more painful that it should be.
Namely, there are three types of behaviors that I have experienced from Starbucks staff when ordering my refrigerated sandwiches after 11am (the “beyond-breakfast” time). First, about 26% of the time, the point-of-sale clerk didn’t check the inventory before taking my money, but I got lucky because my sandwich was in stock; so far so good. Second, about 62% of the time, the clerk personally walked to the fridge to check the sandwich inventory or shouted across the bar to ask someone else to check inventory prior to taking payment (which obviously had a negative impact on my experience as well as on the experience of people in line behind me, even when the sandwich I ordered turned out to be in stock, let alone when it was not). Finally, the remaining 12% of the time I paid for my sandwich just to find out a minute or two later that it was out of stock.
During the same nine months, the same thing happened across over 20 thousand USA Starbucks stores, each of which sells an average of well over 50 different frozen or refrigerated sandwiches items per day (and we are not counting other refrigerated perishable items – just sandwiches). Every time a sandwich like mine is ordered after the morning rush, the clerk knows that inventory may be zero or close to zero and is supposed to shout across the store and/or walk over to the fridge to let some warm air inside and to check stock. That should be 270 MILLION screams across the bar and/or 270 MILLION walks to the fridge prior to taking sandwich orders in nine months… plus, in roughly one out of every eight and a half orders – the clerk who took the order without checking stock had to apologize to the customer, explain that the sandwich is not in stock, and then issue a refund and/or offer a different sandwich to the frustrated customer.
Let’s put this in perspective: if every scream and every walk to the fridge costs Starbucks just five pennies, we are talking about $13.5 million dollars in nine months. Now, combine that with the bad experience for the aggravated customers at least 12% of the time (which is really much more than that – because let’s face it: standing in front of the register while the point-of-sale clerk is dancing behind the bar for 10-15 seconds to find out if your sandwich is in stock isn’t necessarily a great experience, which also translates into an indirect cost to the company). And finally, how about the credit card transaction fees, the time it takes to talk with the customer, to process the refund, and in some cases to give the customer a pricier sandwich in exchange for the one he/she ordered? Should Starbucks care? Should Starbucks shareholders care? Should Starbucks fans care?
Customer Experience: a Function of the Critical Path
The Critical Path in any business process is the shortest possible path for completing a process, operation or a transaction. For instance, the length of the Critical Path for processing an order for a sandwich can be represented by a timeline, where over 80% of all single-item sandwich orders take from 40-55 seconds. From the standpoint of Business Process Management, Retail Customer Experience, and Point-of-Sale System Usability, an important question to ask would be this: “How can we increase the percentage and/or reduce the time?”
So, the Critical Path is clearly not a constant: depending on how intelligent and how adaptable the business process is, the critical path can improve or get worse multiple times during a single day. For example, what should happen when it is the peak hour of 8am on a Tuesday, the store is full of people, the line to the counter is long, and one of the three baristas didn’t show up for work and another one of the remaining two went to the bathroom? Will the point-of-sale clerk be more likely or less likely to do the let-me-go-to-the-refrigerator-and-check-if-we-have-your-sadwitch routine to complete the order? Or will he/she follow the path of least resistance, disclaim any liability for checking inventory, take your order in sincerest hopes that your item is in stock and assume that his/her job is done? The answer is obvious: in critical situations, human beings always follow the path of least resistance – the path that should never be mistaken for the critical path; and the company that fails to recognize this tends to cause customers pain, simply put. But there is light at the end of the tunnel!
Why People Go to Starbucks: More on CX
Statistics show that a whopping 90% of all people in the USA visit a Starbucks at least once a month. Why do people go to Starbucks? Quality of their coffee can be debated endlessly, but their service level and their product variety and quality are all extraordinarily consistent, and they are just-about everywhere. Plus there is some hip factor in the name and the atmosphere, and there is the free internet. In turn, chances are that even if you don’t regularly consume the products Starbucks sells, you probably go there quite a bit – if not to use the free internet, then to meet a business associate on a neutral ground, or simply to hook up with a friend for a quick handshake – just because their big sign out front serves as an easy street landmark, and because many of their stores have free bathrooms. Every time you visit, you are more likely to spend money there – yes, even if you don’t drink their coffee. In fact, a 2015 survey shows that over 70% of those who never buy food or drink at Starbucks still go there at least once a year to buy a gift card or a trinket for someone they care about. In other words, Starbucks is more than a retail store: it is a fully integrated social hub. This brings me to my next point: it is no accident that Starbucks is selling more and more food items.
Starbucks Customer Experience Wake-Up Call
The levels of business analysis and user research needed to define the requirements for a retail point-of-sale system that will track inventory of the items you sell every day are minimal. The level of secondary customer experience research and/or marketing research needed to understand how others in the retail industry track inventories is rudimentary. Also rudimentary is the level of competitor research required to understand how other people selling pre-heated sandwiches track their inventories. So then, what are those hundreds of business analysts, engineers, customer experience specialists and point-of-sale user experience analysts and UI designers at Starbucks working on day and night? Beats me. My hope is that they read this post – because I dig Starbucks and believe they can do much better.
Customer Experience and Tenant Experience are certainly a science, but their goal, in any context, is quite common-sense and straightforward – i.e., provide a usable point-of-sale system and a practical customer-employee or tenant-patron interaction protocol so as to maximize process efficiency and customer satisfaction. From the standpoint of selling sandwiches, this means one simple thing that Starbucks for some reason doesn’t do as of the date this article is published – tracking your inventory and establishing a policy that would not require a point-of-sale clerk to yell, dance, jump, roll, crawl, run or open the fridge door to check inventory before taking money from a customer for a sandwich that has a relatively high probability of being out of stock.