Target is implementing a strategic move to boost sales by incorporating Starbucks beverages and food into its curbside pickup service at stores nationwide. This expansion will cover the majority of Target’s locations, with over 1,700 stores that house Starbucks cafes and offer Drive Up service. The company plans to roll out this feature chain-wide during the summer and have it available across all stores by October.
In an effort to enhance the shopping experience and foster customer loyalty, particularly as consumers reduce discretionary spending, Target has implemented various strategies such as introducing mini Ulta Beauty shops, launching curbside returns, and investing in faster shipping.
It’s important to note that Target has a licensing agreement with Starbucks, meaning that the baristas at its stores are employed by Target.
The retailer initially tested the Starbucks curbside pickup service at select locations last fall. This feature allows customers to add Starbucks beverages and menu items to their curbside pickup orders, which could include groceries, birthday presents, or any other items purchased online.
Target observed the popularity of this service as items like the Iced brown sugar oat milk shaken espresso, birthday cake pop, and iced caramel macchiato topped the list of most commonly ordered products.
Target’s Drive Up curbside pickup service has contributed to the company’s e-commerce and sales growth during the Covid-19 pandemic. Over the course of a year, its annual revenue increased by nearly $31 billion, which accounted for an almost 40% rise from the previous fiscal year that ended in January 2020 to the fiscal year concluding in January 2023.
Although Target did not disclose the specific sales and visitation metrics attributed to Starbucks, the company mentioned that Drive Up has yielded favorable results. Customers who try this service for the first time tend to spend 20% to 30% more at Target compared to their previous spending habits. Consequently, Target has expanded its curbside pickup offerings to include additional items like beer and wine.
However, Target has had its challenges over the past year, missing Wall Street’s earnings expectations in three out of four quarters due to excessive inventory and unexpected markdowns.
Target is set to announce its fiscal second-quarter earnings next week, with expectations of continued slower sales despite improved profit margins. The company projects that comparable sales throughout the fiscal year will vary from a slight decline to a slight increase, while full-year earnings-per-share will fall between $7.75 and $8.75.
Target’s stock has experienced a 12% decline this year, underperforming the approximately 17% growth of the S&P 500 during the same period. As of Tuesday’s closing, Target’s stock stood at $130.98, representing a 1% decrease.
On Starbucks’ front, the company has been diversifying its store formats in response to evolving consumer behavior, focusing more on mobile orders and drive-thru lanes rather than customers lingering inside cafes. Starbucks has introduced cafes exclusively for mobile orders and established locations within Amazon Go stores.
Starbucks’ previous CEO, Howard Schultz, noted that the cafe locations inside grocery and Target stores have been successful in driving sales for Starbucks and generating additional traffic for these retailers, even during periods of reduced customer visits and spending.
In conclusion, Target’s collaboration with Starbucks aims to boost sales and enhance the shopping experience for customers through the incorporation of Starbucks beverages and food into its curbside pickup service.
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