Retailer Profile: Starbucks

From its modest beginnings in 1971, Starbucks Coffee Company's reach today extends across the U.S. to Canada, Europe, Asia, and beyond, bringing the Starbucks coffee experience to the customer almost anywhere.

Central to the company's growth and success has been a constant dedication to offering Starbucks customers the highest quality products. While the company's success was built upon the core product, coffee, Starbucks has become much more than coffee. It is a total coffee experience which encompasses everything from the decor of the retail locations and the music played within to the attitude of the Starbucks employees (known as "partners"), and even to the company's desire to give back to the communities it serves.

Coffee Dedication

Since its inception, it has been the Starbucks employees who have helped drive the success of the company. But it was probably Howard Schultz who started the ignition. Schultz joined the company in 1982, more than a decade after the company's first retail bean store opened in Seattle's Pike Place Market. As director of retail operations and marketing he was influential in the move to provide Starbucks coffee to fine restaurants and espresso bars throughout Seattle.

A year after he joined the company a visit to Milan, Italy inspired Schultz to bring the Italian coffee-bar concept back to Seattle and put it into action in a new Starbucks location. It was a new foray for the company which previously had only provided freshly roasted beans for sale. However, the overwhelming success of the espresso bar concept led Schultz to found Il Giornale, an espresso bar which offered brewed coffee and espresso beverages made using Starbucks coffee beans. A few months later, the continued success of the Il Giornale concept led to Il Giornale acquiring the assets of Starbucks in 1987 with the backing of local investors. The new company changed its name to Starbucks Corporation.

At that time, Starbucks operated 17 stores and had begun to expand beyond Seattle to cities such as Chicago and Vancouver. For the next decade and beyond, the company experienced tremendous growth bringing specialty coffee to the everyday consumer, and in the process helped create and define the specialty coffee industry.

Employee Dedication

While the success of the company often is attributed to the persistence and vision of the company's current CEO, Howard Schultz, it is also the employees, from management down to store level, who are at the heart of the company's success.

At the store level, Starbucks has been successful in bucking the norm at most retail service environments where employee turnover is high and competence or enthusiasm is waning. "When we first started our business, our attitude from the beginning was that the employees on the front line really have the most to do with our success," said John Richards, Starbucks president, retail North America.

The challenges of a retail and foodservice environment have been overcome through a strong employee base. "We're fortunate that the turnover of managers and hourly employees is probably one of the best in the industry," explained Richards.

Richards takes this employee loyalty as a compliment, but attributes it to the company's dedication to each employee's needs. Investment in "partners" has helped build their loyalty to the company, to coffee, to customer service, and to each other.

The heart of the Starbucks experience begins with employee training. For retail partners, the training program focuses on coffee knowledge, product expertise, customer service, and interpersonal skills — all necessary to understand the product they provide to customers on a daily basis in order to create the Starbucks experience.

New store-level partners are welcomed into the Starbucks community with a week-long indoctrination into the cultural aspects of the company. The technical aspects of the job — those that relate to beverage preparation, for instance — are covered. From there, it is the manager's responsibility to follow up with in-store modules for ongoing training in specific areas.

All full- and part-time partners who work at least 20 hours a week are offered a full slate of generous benefits. Among the benefits are full health and dental coverage, vacation, and participation in the company-wide stock option plan called Bean Stock. Loyalty and a sense of belonging are further emphasized in open forums where employees, regardless of position, are encouraged to bring their suggestions or concerns to the attention of corporate management. Often it is the barista who is the impetus for a change simply because he or she is the one on the front line dealing with customers on a daily basis.

Being on the front line requires communication, be it communication in training employees to perform their job properly, or communication with customers. "Starbucks partners are always on the go. Customer flow is quite steady, and they have to perform tasks requiring a bit of knowledge," Richards explained. "Because of the way the service line is set up, partners must interact with each other to complete a task, creating a sense of teamwork. Customers shift from station to station, coming into contact with several employees during one transaction. Therefore, communication is an essential part of our success. The positive customer experience is based on the communication between partners and their customers." Human interaction is essential and constant in the Starbucks environment and Richards believes that this constant interaction is the reason employees don't get bored with their job. "They're always challenged," he said.

Retail Growth

The Starbucks cafes were developed to fill a need in the community, a need Schultz enjoyed first-hand in the coffee bars of Italy. Specifically, that need was to offer locals a place to meet and feel comfortable — essentially a third place other than home or work to enjoy and relax.

Even at the pace of opening a store a day, Richards says, "Starbucks has never lost sight of what we stand for. In fact, I think it has made us even better. In terms of growth, generally we feel that we are still in the early stages, not only in the sense of geographic expansion, but with regard to the retail concept. Coffee is expected to be a convenient beverage, and our aim is to make coffee available to customers wherever they are." But he also stressed that the company's growth isn't relegated to just opening a new location, but instead to growing the concept of the Starbucks retail environment. And that is under constant scrutiny, with the objective to provide the best experience for the customer.

In addition to the traditional retail store, which averages 1,200 square feet and offers a range of hot and cold beverages, pastries, in some locations sandwiches, a selection of retail merchandise, and a place for customers to sit and enjoy their beverage, the company has several additional concepts. Some retail locations are an extension of the traditional store concept, but enlarged retail space allows for in-store musical events where customers can lounge on leather sofas next to a fireplace. On the other end of the spectrum is the Doppio Bar used primarily for take-out orders. "We stay attuned to the needs of a community and a location, allowing Starbucks to modify the store concept, yet keep the Starbucks feel," explained Richards.

Complementing Coffee

To illustrate Starbucks' dedication to providing customers the best-tasting and most exciting coffee experience, company employees have circled the earth seeking the choicest Arabica beans for the company's extensive blend and single-origin coffee offerings. Broken into four coffee categories — Milder Dimensions, Lively Impressions, Rich Traditions, and Bold Expressions — there is a taste and roast profile suitable for nearly every customer.

However, coffee and espresso are only a portion of the café offerings. To increase sales and create a reason for customers to visit the café beyond the traditional morning cup or evening dessert, Starbucks has added a range of beverages to accommodate a variety of customers during different parts of the day. Blended beverages such as Rumba Frappuccino, or the Caramel Frappuccino, an extension of the company's hot espresso beverage called Caramel Macchiato, have been developed. The Tiazzi line of blended juiced tea beverages offers customers a low-fat fruity beverage with the kick of iced tea flavor. "We are constantly striving to create new exciting coffee environments. Part of that coffee environment is expressed beyond the traditional hot coffee and espresso-based beverages," said Richards.

Complementing the coffee experience is the ambience created within a Starbucks café. In addition to the hand-crafted beverages, fresh-baked pastries, coffee-related merchandise, confections, which all help transmit the Starbucks experience to the customers, in certain retail locations books and compact discs are available. Background music jumps from the mellow tones of jazz to the high notes of opera, traversing a range of customer moods.

The company also operates a mail order business as well as a specialty sales group which focuses on providing coffee to fine dining establishments, food service, travel, and hotel accounts.

The newest addition to the Starbucks entourage of brand-building elements is a publication called Joe. In an agreement with Time Inc.'s custom publishing division, the magazine will be sold and exclusively distributed in most of the company's retail stores. The editorial content in Joe will reflect the thought-provoking conversations of the coffeehouse tradition, re-invented for today and filled with both fiction and non-fiction writing.

The Customers and Their Community

Employee dedication, quality products, an inviting retail environment, and a sense of community have all welcomed Starbucks customers from morning 'til night. Starbucks brings that neighborhood feeling to customers wherever they are — the baseball field, the airport, in the air, the bookstore, or around the corner from work, making it relatively easy for the customer to enjoy Starbucks. In fact, the average Starbucks customer visits a cafe 18 times a month, with 10 percent visiting Starbucks twice a day.

Reinforcing the company's dedication to the communities it serves, Starbucks is an avid supporter of a variety of organizations which benefit a range of issues from literacy to environmental awareness. Additional philanthropic support is provided through The Starbucks Foundation. Since its inception in 1997, the Foundation has identified literacy as its charitable focus, awarding 123 grants totaling $501,126 to literacy programs in North America. Further improving the lives of those who grow, harvest, and process the coffee Starbucks purchases, the company is focusing on specific projects aimed at improving conditions in coffee-growing regions of the world.

A Good Neighbor

With the objective to "establish Starbucks as the most recognized and respected brand of coffee in the world," Starbucks has truly become a global brand, reaching customers where they shop, where they dine, where they work, and where they travel. Regardless of how quickly the company expands its retail operations (which will continue on the same one-a-day path), rigorous standards are in place to assure customers that Starbucks will remain true to the company mission: "To establish Starbucks as the premier purveyor of the finest coffees in the world, while maintaining our uncompromising principles as we grow."