Starbucks aims to get bigger by going smaller, with a new store format that’s a fraction the size of its normal cafe.
The coffee chain is opening “Starbucks Pick-Up,” a first-of-its-kind location in the United States that encourages orders from its app. The store, located near New York City’s Penn Station, opens Tuesday. Plans for the store were announced in September.
The new location is one answer to what Starbucks (SBUX) envisions as the third place between work and home, according to Kathryn Young, the company’s vice president of urban markets. She told CNN Business that customers want “convenience, comfort and connection” and the pick-up store is designed specifically around the first of those.
Young said the store is meant to be “predictable and effortless” for customers who want seamless beverage or food pick-up in their busy lives.
The store is around 1,000 square feet, nearly half the size of a regular cafe’s 1,800 square feet. It does not have the large seating areas or cases of food in a typical Starbucks, although a full menu will be offered.
The design is also brighter and more modern than Starbucks’ cozier coffee shop aesthetic. A large digital signage board will tell people the status of their order.
Customers aren’t required to order from Starbucks’ app, but they are encouraged to do so. Baristas will still take orders, and assist customers in downloading and using the app.
The digitally focused store is part of the company’s goal to encourage customers to join its app-based rewards program. The number of Starbucks Rewards members grew 15% over the past year to 17.6 million, the company said in its earnings release on Wednesday. Rewards customers spend more than a typical customer.
Starbucks Pick-Up will help the company “test and learn” the format, Young said, which it could expand to other US cities.
The new format may help Starbucks prevent cannibalization, when one location takes clients from another Starbucks nearby. That’s a problem in dense urban areas such as New York City. In cities with high rent costs, the company can open these lower-rent, smaller stores instead of higher-rent, larger cafes, offering a different experience while still maintaining brand loyalty.
Starbucks has a variation of its pick-up store in China, which is called Starbucks Now. Customers can order ahead and pick up their drinks in a sleek store. It’s similar to Luckin Coffee (LK), a rapidly growing regional rival that places heavy emphasis on digital orders and transactions.
CEO Kevin Johnson said on Starbucks’ earnings call this week that it’s “seeing encouraging early results” from Starbucks Now and plans to open more of them across China’s largest cities.
Both Starbucks Now and Starbucks Pick-Up are part of the company’s portfolio of stores that are “tuned to different needs at different times,” Young said.
On the completely opposite end of the spectrum is Starbucks’ Roastery, its massive and glitzy destination for coffee afficionados. The world’s largest Starbucks Roastery is scheduled to open in mid-November. The four-story Chicago location is 43,000 square feet and is replacing a former Crate and Barrel location on the city’s Magnificent Mile.
