The “mosh pit” at Starbucks is getting less intense.
That’s the term former CEO Howard Schultz used for the peak morning chaos at Starbucks, caused by the company’s mobile ordering system getting out of sync with in-store reality.
Everyone’s app promises the same seven-minute wait, everyone shows up at once, and drinks pile up while customers jostle to find their orders, not unlike the front section at a concert.
The mobile system Starbucks pioneered more than a decade ago had become, in the former leader’s blunt assessment, the company’s “biggest Achilles heel, and it’s not even a close second,” Schultz opined during a June 2024 appearance on the Acquired podcast.
It looks like the fix is starting to work.
Starbucks on Wednesday reported its first U.S. comparable transaction growth in two years. Both loyalty members and casual customers are visiting more often. Service times at peak are running below the company’s four-minute target, even with the increased traffic.
The results are early signs of progress from an operational overhaul under CEO Brian Niccol that pairs old-school service standards with new technology. Niccol, who joined Starbucks as CEO in September 2024, led a similar revamp previously as the top executive at Chipotle.
At Starbucks, the effort focuses on what the company calls its “green apron service” model. That includes bigger staffing rosters, a four-minute service target, and an emphasis on baristas actually engaging with customers rather than just cranking out drinks.
The tech components include Green Dot Assist, an AI-powered tool built on Microsoft’s Azure OpenAI platform that helps baristas look up drink recipes, troubleshoot equipment issues, and figure out where to put staff during a rush. The technology went from a 35-store pilot last June to full deployment across North American stores in November.
Starbucks also works with Redmond-based startup NomadGo for inventory counting using computer vision, freeing workers from a task that pulls them away from customers.
As for that morning mosh pit, a “Smart Q” algorithm now manages mobile order timing to spread out pickups rather than funneling everyone into the same window.
Speaking on the Starbucks earnings call Wednesday morning, Niccol said the company has “brought order to mobile orders, ensuring they remained accurate and on time.” Mobile orders rose to 32% of transactions, up a percentage point, the first increase in that metric in two years.
Last month, Starbucks hired Anand Varadarajan as chief technology officer, tapping a 19-year Amazon veteran who most recently ran technology and supply chain for the company’s worldwide grocery business. He started Jan. 19.
Progress hasn’t come cheap. North America operating profit fell to $867 million from $1.2 billion a year ago, with margins dropping to about 12% from nearly 17%. Higher staffing costs and coffee prices were the main causes. Earnings per share fell 19%, to 56 cents.
“We are clearly in the early stages of our turnaround,” Niccol told analysts. “I don’t expect the path forward to be linear, but we will continue to test, learn and refine our approach.”
In a positive sign, the 650 stores that got the green apron model first are outperforming the rest of the chain by about 2 percentage points in comparable sales. Niccol said the gains are driven almost entirely by transaction growth, not higher prices.
Separately, a former Starbucks vice president filed a lawsuit Monday alleging safety issues with the Siren System, a drink-making equipment overhaul that’s part of the broader turnaround effort. Starbucks called the claims “entirely without merit.”
The company is expected to detail its next moves at an investor day Thursday, including potential details on a new store prototype called the “Coffeehouse of the Future,” designed to balance mobile order efficiency with the sit-down experience Starbucks built its brand on.
Read the full article here
