In response to changes caused by the COVID-19 pandemic, Starbucks plans to accelerate its digital experiences and close up to 400 company-owned stores over the next 18 months, according to an SEC filing.

Building on the approximately 200 net new stores that opened in the Americas the second fiscal quarter, the company now expects to open  300 stores in fiscal 2020, down from its original expectation of 600, according to the filing.

The chain is also repositioning stores in different locations and store formats. For example, customers will see more convenience-led formats with drive-thru and curbside pickup options, as well as its Pickup locations, according to the filing. These store experiences are powered by the Starbucks App, which supports its ordering and paying ahead, along with engaging its Starbucks Rewards members.  

"As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers," Kevin Johnson, CEO, said in a prepared statement.  

The transformation includes the expansion of Starbucks Pickup stores in  New York City, Chicago, Seattle and San Francisco, and convenience-led enhancements such as curbside, drive-thru and walk up windows in suburban areas.

With customers' increased use of the Starbucks App to order ahead, and the national availability of Starbucks Delivers through Uber Eats, Starbucks will also renovate select store layouts, including the addition of a separate counter for mobile orders at high volume stores. 

Prior to the COVID-19 crisis, approximately 80% of Starbucks U.S. transactions were on-the-go, driven in part by the ability to order and pay ahead using the Starbucks App. This strategy aligns with evolving customer preferences that have accelerated as a result of COVID-19, including higher levels of mobile ordering, more contactless pick-up experiences and reduced in-store congestion.  

In addition to Pickup stores, customers will soon be able to utilize curbside pickup from their car. Customers will use the Starbucks App to order and pay ahead as well as check-in at designated parking spots at the store once they arrive. Over the coming months, Starbucks will increase the number of stores that offer curbside pickup as well as pilot a select number of locations to exclusively offer this format. 

U.S. company-operated stores began to reopen in the second week of May, increasing from approximately 50% open at the end of April to 91% open at the end of May, according to the SEC filing. While these stores generally had reduced hours and many were limited to "on-the-go" transactions, U.S. comparable store sales improved versus the prior year from -63% in the month of April to -43% in the month of May.

While new store development activity temporarily paused in the Americas due to the onset of COVID-19, new store openings have resumed.

"This goes to show just how crucial Starbucks' mobile payment feature has been in maintaining customer loyalty during the pandemic and will continue to be as they roll out new store formats that prioritize customers on the go," Vijay Sondhi, CEO of NMI, a payments enablement technology company, said in an email to this website. 

Sondhi further thinks Starbucks might consider installing self-service kiosks.

"As Starbucks continues to seek new ways to engage customers, another option to consider is payment kiosks," Sondhi said. "Kiosks, which are already used by many fast food chains, offer consumers a unique opportunity to pay by card while avoiding interactions with a sales assistant — taking an additional physical touchpoint out of the purchase experience and thus helping customers feel more comfortable entering stores again. Taking it one step further, these kiosks can be equipped with contactless features, removing the need for customers to touch kiosks whatsoever while purchasing their coffees."

For an update on how the coronavirus is affecting convenience services, click here.

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