tarbucks Is "Juicing" Its Earnings per Store through Technological Innovations

An important signal for a company is who is chosen as the new CEO. Howard Schultz of Starbucks has led the company through successful strategic execution over much of its history. In 2015, Kevin Johnson, a former CEO of Juniper Networks and 16 year veteran of Microsoft took over as CEO of Starbucks, succeeding Schultz. Johnson has engaged with the company's digital operations and will supervise information technology and supply chain operations. Many brick and mortar stores have experienced decreasing sales in the United States as online traffic has increased. Interestingly, 2014 Starbuck sales store operations have risen 5 percent in the fourth quarter; this 5 percent came from increased traffic (2 percent from growth in sales and 3 percent in increased ticket size). The driver of this increase in sales is mainly an increase in technology applications. To facilitate this increase in sales per store, Starbucks is ramping up its digital tools such as mobile-payment platforms.

Furthermore, it has ramped up online sales of gift cards as a way to drive revenue. In December 2014, it allowed customers to place online orders and pick them up in about 150 Starbucks outlets in the Portland, Oregon area. Besides leadership and a focus on technology, Starbucks receives suggestions, ideas, and experimentation from its employees. Starbucks employees, called baristas, are seen as partners who blend, steam, and brew the brand's specialty coffee in over 21,000

stores worldwide. Schultz credits the employees as a dominant force in helping it to build its revenue gains.

To further incentivize employees, Starbucks was one of the first to provide comprehensive health benefits and stock option ownership to part-time employees. Currently, employees have received more than $1 billion worth of financial gain through the stock option program. As an additional perk for U.S. employees, Schultz created a program to pay 100 percent of workers' tuition to finish their degrees through Arizona State University. To date, 1,000 workers have enrolled in this program.

Starbucks is also known for its innovations in new types of stores. For instance, it is testing smaller express stores in New York City that reduce client wait times. As noted earlier, Starbucks has emphasized online payment in its approaches which facilitates the speed of transaction. It now gives Starbucks rewards for mobile payment applications to its 12 million active users. Interestingly, this puts it ahead of iTunes and American Express Serve with its Starbucks mobile payment app in regard to number of users. To put its innovation on display, Starbucks opened its first "Reserve Roastery and Tasting Room." This is a 15,000 square foot coffee roasting facility and also a consumer retail outlet. According to Schultz, it's a retail theater where "you can watch beans being roasted, talk to master grinders, have your drink brewed in front of you in multiple ways, lounge in a coffee library, order a selection of gourmet brews and locally prepared foods." Schultz calls this store in New York the "Willie Wonka Factory of coffee." Based on this concept, Starbucks will open small "reserve" stores inspired by this flagship roastery concept across New York in 2015.

These technology advances and different store offerings are also taking place internationally. For example, Starbucks is expanding a new store concept in India and it's debuting this new concept store in smaller towns and suburbs. These new outlets are about half the size of existing Starbuck cafes in India.

Question:

Discuss the key issues facing the traditional brick-and-mortar business models. What initiatives is Starbucks implementing to continue their growth trajectory?