Target’s Brilliant Move With America’s Best-Loved Café: Starbucks

Target
TGT
recently announced it will begin a nationwide rollout of its new service: free curbside delivery of Starbucks
SBUX
orders. Target customers placing a Drive Up order can add a Starbucks purchase to the delivery through its contactless curbside service. The move by Target and Starbucks will garner great appeal from the younger generations who have turned to using mobile devices to order ahead. The most requested feature from Target customers on its Drive Up service was the ability to add a Starbucks product to the order. The company has listened and responded, working with Starbucks as a licensed partner to execute the service.

A win for Starbucks

The new service aligns with the Starbucks Reinvention Plan, an ongoing effort to grow revenues by enhancing the customer experience across all retail touchpoints. A key area of focus is expanding digital convenience, and the new service with Target falls into this goal. Target and Starbucks have had a licensing agreement for over twenty years.

“More than half our U.S. customer base is Gen Z and Millennials reflecting relevancy and brand love across generational cohorts, trends we see with diverse customer cohorts as well,” said Sara Trilling, Executive Vice President and President of Starbucks North America in the company’s fourth-quarter earnings call last year.

These younger reward members are keen to use the mobile order and pay option, which accounted for 25% of total transitions in the U.S. market last year. The Starbucks mobile app usage increased by 12.4% in 2022 to nearly 33 million users.

Starbucks’ recent third-quarter earnings performance showed a 12% increase in revenue to a record $9.2 billion for the period ending July 2, 2023. The company reached 31.4 million U.S. active Starbucks Reward Memberships, up 15% from the previous year.

Target drives convenience with experience

Target’s core customer is the Millennial mom shopping with children (Generation Alpha), but much of Generation Z also shops at Target. These are the core markets for Starbucks as well. The Starbucks curbside add-on appeals to this younger generation and trains Generation Alpha that they can get Starbucks treats when shopping with moms and dads. Curbside pick-up allows busy parents to take advantage of efficient and convenient shopping and now includes the added perk of picking up a favorite café item. The Target Circle loyalty program has over 100 million members.

As Starbucks continues to cater to these younger customers by offering plant-based drinks and cold brews, they are cultivating a very engaged shopper that grows up with the brand. Target began building the Drive Up with Starbucks app functionality in late 2021, which was very successful in pilot stores. The top-selling items are iced brown sugar oat milk shaken espresso, birthday cake pop, and iced caramel macchiato.

“Our guests have long told us Drive Up is a game-changer, adding convenience to their daily life, especially when they’re short on time,” said Mark Schindele, chief stores officer at Target. “We’ve continued listening to our guests, who’ve told us overwhelmingly that Drive Up with Starbucks would bring even more ease and joy to every Target run.” The service is being rolled out in the 1,700-plus stores with a Starbucks Café and Drive Up service by October.