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On the very same day last month, Starbucks launched two highly significant stores on opposite sides of the globe. On December 14 in New York City’s Meatpacking District, the latest Starbucks Reserve Roastery opened its doors: a 23,000-square-foot experiential coffee palace, complete with a signature 30-foot copper cask, a 60-foot cocktail bar and a terrarium that is a “tiny corner of Costa Rica.”
Meanwhile in China, a virtual Starbucks store began operating, accessed via multiple digital doors – numerous Alibaba apps and Starbucks' own China app.
Whether planned that way or not, the synchronous opening of a physical flagship in Manhattan and a digital flagship in China spoke volumes about both the direction of Starbucks and its leading source of innovation.
The super-premium Roastery format, which debuted in Seattle in 2014 and quickly became a top tourist attraction in the Emerald City, is now rolling out to iconic destinations around the world.
The second location (and the largest Starbucks on earth at 30,000 square feet), opened in Shanghai in December 2017, and was followed in 2018 with “the most beautiful Starbucks in the world” in Milan. Then came New York, and arriving this year is a Tokyo address, and then a massive Roastery on the Magnificent Mile in Chicago, which will take the crown of the biggest Starbucks ever. (Incidentally, the Chicago Roastery will occupy the site of an iconic Crate & Barrel store, a spectacular home to the furniture brand for a generation.)
The Reserve Roastery concept is all about “premiumizing” the Starbucks experience and providing a brand halo for the rest of its empire. For around $6, you not only get a damn good cup of joe, but entry to what ex-CEO Howard Schultz called the “Willy Wonka Factory of Coffee.” The Roastery is as much a theme park as it is a place to park yourself for coffee, and that’s absolutely on trend for retail today, where “being” is as important as “buying.”
But, as dazzling as the Starbucks Reserve Roastery concept is, to me the real news is what’s happening in China – and how that market is leading the way for Starbucks in the U.S. The just-opened virtual Starbucks is the latest example of what has become a blisteringly fast wave of innovation.
Starting in 2015, Starbucks opened its first online store on Alibaba's Tmall, and then, as part of the 11.11. Shopping Festival, launched an innovative "Catch the Cat" Augmented Reality (AR) game. By 2017, Starbucks was ready to more formally partner with Alibaba by enabling the Alipay mobile payment platform across its then 2,800 Chinese store locations.
Later that year, Starbucks Reserve Roastery Shanghai opened with an in-store and online customer experience powered by Alibaba, which incorporated an AR tour.
The New York Roastery has followed suit with its own AR functionality.
In September 2018, “Starbucks Delivers” launched via Alibaba’s Ele.me service, expanding coffee delivery from a pilot to around 2,000 stores by the end of the year. Starbucks is also opening delivery-only “Star Kitchens” inside Alibaba’s Freshippo supermarkets. In the U.S., Starbucks has stated that it aims to leverage what it has learned in China as it rolls out delivery stateside.
And now the new virtual Starbucks allows customers to order beverages, food and merchandise not just from within Starbucks’ native app, but across Alibaba’s Taobao, Alipay and soon Tmall digital properties. Customers can even earn Starbucks Rewards, no matter their entry point. That’s both revolutionary and refreshing – taking a customer-centric rather than app-centric approach to digital retail.
These are not just a number of individual digital tactics, but an integrated “New Retail” strategy to completely digitize Starbucks’ business in China. An “Alibaba Operating System” is the uniting force, recognizing the customer and facilitating interaction no matter how, where or when they want their Starbucks.
Starbucks has a much-admired “digital flywheel” strategy, which powers the company in the U.S. The Alibaba partnership adds “rocket fuel” to that strategy, according to Starbucks president and CEO, Kevin Johnson. The pace of innovation in China is “faster than any other part of the world” , he says, so what better place to push things forward, particularly given the strategic importance of the market? Starbucks plans to open a store every 15 hours in China between now and 2022, taking it to 6,000 locations. Back in 2016, Howard Schultz stated that the market “will be larger than the U.S. over time.”
So to go back to the beginning, while the opening of the Starbucks Reserve Roastery in New York may have garnered more headlines, the launch of the Starbucks virtual store in China is arguably more important. Pillars are more visible, but pixels are more powerful.
