Starbucks Reserve: The Coffee Shop of the Future?

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1 Starbucks Reserve: The Coffee Shop of the Future? On October 21, Starbucks opened Starbucks Reserve, a new concept store, in Central London. The store features table service and a coffee- tasting corner where customers can interact with the baristas. Starbucks Reserve offers coffees sourced from microplantations and boasts five different coffee- brewing methods. From 4 p.m. on, the store serves wine, craft beer and sharing plates. Tables are designed for mobile device users, with wireless charging and laptop sockets. A number of innovations introduced at Starbucks Reserve are likely to be replicated in regular Starbucks outlets. Back to the Future showed us in 1985 what October 21, 2015, might look like. Unfortunately, in the movie, Marty McFly did not stop for a tall latte at Starbucks, which, back then, was a coffee shop chain with just 46 stores across the Northwest and Midwest of the US. So, we had to wait until the actual Back to the Future Day, October 21, 2015, to get an idea of the future of coffee shop chains that was the day Starbucks opened its new concept store, Starbucks Reserve, in central London. The store combines superior design modern furniture and large glass walls on the front of the outlet with a traditional British pub feeling with a low bar where people can sit and interact with the baristas. 1

2 Visitors popping into the store immediately feel that they are not in a regular Starbucks. A barista at the door welcomes customers and asks where they would like to be seated. A large digital menu board is visible over a grab and go area that displays light snacks and bottled drinks. The display is situated just beyond the entrance to better serve on- the- go customers. One might look for the traditional queue at the counter, but there are no counters in this store. All the transactions occur either at the table or, for on- the- go orders, at the entrance, through tablets that each of the baristas hold. Starbucks Reserve is a store for connected consumers, offering fast wi- fi, sockets for customers laptops and Powermat wireless charging points for smartphones. 2

3 Apparently aiming to attract a discerning clientele, Starbucks Reserve features special coffees and brewing methods. Mimicking the edgy independent coffee shops that can be found in London, the store offers different brewing methods Chemex, pour over, siphon, Clover and the classic Nuova Simonelli machine some of which are quite spectacular. The siphon, for instance, is a system consisting of a double- chamber vacuum and halogen beam that resembles a piece of chemistry lab equipment. Coffee blends are also quite unique, featuring beans from microplantations in coffee- growing countries such as Vietnam, Tanzania and Peru, and changing periodically, so that clients can always find some new blend to try. The store also features a coffee- tasting corner, where customers can sit at the bar, interact with the baristas, see them mastering the art of coffee making and taste the final result. 3

4 Unique for a Starbucks, every day from 4 p.m. on, the store serves a selection of world wines and two locally bottled craft beers, brewed in Hackney and Battersea, together with charcuterie plates for sharing. With this move, Starbucks Reserve, which is located in the heart of London s theater district, aims to become a destination for a late afternoon or early evening aperitif for those heading to a restaurant or the theater. Starbucks Reserve is most likely going to remain confined to premium locations such as central London, and it is very unlikely that the concept store will become the default outlet format for the Seattle- based company. However, a number of innovations introduced by the concept store are very likely to be replicated in regular Starbucks stores. For instance, wireless charging points for smartphones have already been installed at some regular Starbucks stores. The elimination of physical counters may also make sense in some regular outlets, as it could reduce wait times and Starbucks has already moved in this direction with its new option to order via its mobile app. As consumers become more sophisticated, it is also likely that regular stores will start serving more premium coffee. But we think it is unlikely that the premiumization in most Starbucks outlets will go as far as introducing five different coffee- brewing methods or serving wines and charcuteries. The new Starbucks Reserve store is clearly an experiment. It can be used to test the market and see what innovations can be successfully exported to regular Starbucks stores to improve the customer experience. 4

5 Deborah Weinswig, CPA Executive Director Head of Global Retail & Technology Fung Business Intelligence Centre New York: Hong Kong: Filippo Battaini Marie Driscoll, CFA John Harmon, CFA Aragorn Ho John Mercer Shoshana Pollack Kiril Popov Jing Wang Steven Winnick HONG KONG: 10th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: LONDON: Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0) NEW YORK: 1359 Broadway, 9 th Floor New York, NY Tel: FBICGROUP.COM 5