Starbucks at your door: The multinational chain starts a coffee delivery service
It was 3:35 p.m. on a sunny Thursday in Koreatown. Too late for lunch, and too early for dinner. Instead, Manuel Abaunza, a Cake House Bakery and Café regular, dropped by for some tea, bread, relaxation, and fresh air.
“I love to come here for my afternoon tea and snack time, to get away from the pressured office environment and just enjoy myself,” Abaunza said about his regular visits to the Cake House, located near his office on 6th plaza in Koreatown’s City Center.
Abaunza and many others enjoy visiting cafés because they provide them spaces to relax and socialize. For many young customers they are also places to cram in those last-minute study materials for an exam.
“The main purpose for going to Starbucks especially for young teens like me, is to hang out in Starbucks, grab a drink, maybe just stay at the café to have a little study session,” said Eunice Lee, a Cake House Bakery and Café employee.
But Abaunza and Lee’s coffee house habits are not enough to prevent Starbucks from reaching out to a new group of customers: those who rarely set foot in its stores.
The multinational coffee chain recently announced a new delivery service in selected areas of Seattle and New York.
The new plan will test the waters then possibly expand to other areas in the nation, Starbucks CEO Howard Schultz announced during a Starbucks shareholders meeting in March.
This introduction is part of the corporation’s 4-year plan to double its current revenue, Schultz said in the meeting.
Starbucks will be testing out the new delivery service in the second half of 2015, with Seattle stores partnering with a San Francisco-based delivery app, Postmates, while New York stores will start the “Green Apron” delivery service.
Starbucks baristas in New York, or the “Green Apron,” who work in a Starbucks within or near an office building will personally deliver coffee to customers under this plan.
Starbucks plans to test run this service in the Empire State Building in New York, according to a Starbucks press release.
Café customers have mixed feelings about this service.
Some people like Abaunza think visiting café is about getting what you paid for — the environment, the quality of the food and drink, and a reasonable price for the product and the service you receive. A delivery service will only attract him if there is little price mark-up.
“Delivery is convenient, but only worth it if it saves me money,” Abaunza said. “If it doesn’t, it doesn’t matter to me.”
A Koreatown employee of a competing café thinks that delivery service contradicts Starbucks’ previous investments in remodeling.
“I find it surprising that Starbucks is implementing this program when they have made such an effort to remodel their franchises as cafes,” said Carolyn Park, Caffé Concerto marketing manager.
But some people, like Irina Fedoseeva, a Cake House Café regular, think coffee delivery will be a great alternative on some occasions.
“If I’m with a group of friends, we might use delivery service, because it is convenient,” she said.
Introducing delivery service as an alternative business strategy will help Starbucks become more competitive in the coffee industry, said Kyle Mayer, a USC business strategy professor.
“They have the money to invest, and they are doing well, so they are trying to come up with new ways to differentiate themselves from other cafes,” Mayer said. But there are still many uncertainties in the future for this implementation plan that need to be sort out.
Although takeout and delivery are long-established as popular and highly-demanded restaurant services, a study by Statista, an online statistics portal, actually showed a recent decrease in demand for those services.
The study, done in April 2014, showed that 14.5 percent of people order takeout and delivery food from restaurants in the U.S. a few times a week, a 10 percent decrease from the previous year.
Starbucks could do well with its delivery service, but there are some challenges, Mayer said.
He said customers want hot coffee, so Starbucks will need to figure out many details about delivery, such as how to deliver it hot and how to maintain the quality of its product during the delivery so it is delivered fresh into customers’ hands.
Mayer also said it will be difficult to carry the same service in Los Angeles.
“They would have to be clear about what region it is,” Mayer said. “It will be really challenging, because L.A. is so spread out, and there are more competitions here, like Coffee Bean.”
A flat delivery fee, regardless of distance or quantity, may also pose a challenge.
Starbucks has not made a decision on the flat rate, but Postmates’ current delivery fee is set as $5 per order within a one-mile radius, and the price goes up depending on the location, said Bastian Lehmann, co-founder of Postmates, during the Starbucks shareholder meeting.
“When delivery fee exceeds the price of the product, that is risky,” Mayer said.
Potential customers of the service are thinking it twice after they learned about the proposed delivery fee.
Irving Arreola, a Starbucks barista and cashier, was supportive of the delivery service and said he would use it, but he is unsure if the proposed delivery fee is justifiable.
“I think people would be upset,” said Irving Arreola, a Starbucks barista and cashier. “If I’m ordering a latte that is $3 and I have to pay $5 delivery fee, a coffee for $8 is just too much.”
Another Starbucks delivery service supporter said the flat delivery fee may or may not play a factor that determines if she decides to use the service.
“I don’t know if I will do it for $5,” Karlee Hormell, a Starbucks regular. “But if I didn’t have the time to go out and get the drink, and if I feel like spending the extra money, then yes I would try. But still, $5 just kind of throws me off.”
As for impact on major local Mom and Pop cafes, if Starbucks does decide to introduce delivery service in L.A., Mayer thinks it would not do much pose too big of a threat to other local coffee businesses.
“It is difficult for independent cafes to implement delivery because of their scale and resources, so they probably will not introduce delivery service,” Mayer said.
Lee, the Cake House Bakery and Café employee mentioned earlier, also believed Starbucks delivery service will not affect the café she works at.
“Most of our customers are customers of the mall, so they buy bread from us and want to quickly grab a drink to-go,” Lee said.
She added that delivery service will not be effective for them because they have regular customers from the mall and the grocery store nearby, so they would continue to have customers as long as people come grocery shopping.
Park, the Caffé Concerto marketing manager mentioned earlier, believed if Starbucks figured out how to deliver coffee effectively, other businesses will adapt its technology, but she is not sure if her store would go for it.
“I think it would take some time to see whether the delivery model is successful before small business make the leap,” Park said. “Delivery service would not be beneficial for us, unless we considered delivering food also. We could easily deliver lattes or coffees with food, but alone, it would not be worthwhile.”
Independent cafes’ regular customers will probably continue to shop in those cafes even if Starbucks has delivery service because most of them return to the store for many reasons, such as product variety, price, café environment, etc., and Starbucks may not have these desired qualities, Mayer said.
Abaunza, who always enjoys his afternoon tea at Cake House Bakery and Café, is one of those customers that Mayer described.
“I personally look for the price and the quality, and a store like the one we are at has both of those,” Abaunza said. “I would much rather walk or drive here than call for pricey delivery.”
And with that, Abaunza continued to enjoy his tea and bread saying that he will come back to this café as much as he can, even if he is overwhelmed with work and might soon have the option to order in from a competitor.
Emily Lee is currently a student at the USC Annenberg School for Journalism and writes for Annenberg News digital and broadcast outlets.
