I was recently interviewed by CNBC to discuss Starbucks, prior to the opening of its first store in Italy.
You might ask, “Why would an American news outlet interview an Australian-based Gartner analyst about a coffee shop opening in Italy?”
The answer: it’s all about the customer. Could Australia, one of the few markets globally where Starbucks has struggled to gain traction, provide lessons for Starbucks Italy?
The Australian Experience
Despite a thriving and well-established Australian coffee scene built on a wave of Italian and Greek immigrants who arrived in the mid-1900s, today there are only 41 Starbucks stores Down Under. This is down from a peak of nearly 90 in 2008 and in a café industry that’s expected to see over $6 billion in revenues in 2018.
Why? I’d suggest Starbucks failed to make sufficient adaptations to its model to accommodate the wants and needs of Australian consumers who simply didn’t see the need for larger coffee sizes, sweeter flavors and different terminology (“What is a Frappuccino?”, “How large is a Tall?”) Couple this with a rapid store rollout before an appetite could be developed for Starbucks differentiated offerings. In 2008, eight years after opening its first store in Australia and $105 million in accumulated losses, Starbucks closed 61 locations (or about two-thirds of the stores in the network).
Putting the Customer First
The lesson for supply chain leaders? The customer needs to be at the heart of how we design and operate the supply chain. As a guide to achieving this, my colleague Lisa Callinan set out a six-step path that lays out how supply chain leaders can successfully design their own customer experience initiative and, hopefully, avoid struggles similar to those of Starbucks Australia. The key is resequencing supply chain design processes so they start from the customer back, instead of the traditional push models that start with a product or service that needs to find a route to market.
Step No. 1: Audit Processes
The customer experience project should begin with an audit of the key supply chain processes that directly impact customers. Examples of those processes include order capture, invoicing, cash collection, forecast management, delivery, track and trace, and returns.
Step No. 2: Identify Importance for Customers
Next, evaluate these processes based on how important or impactful they are on your customers’ experience. Be sure to look at processes from the perspective of your customers first, not the organization’s perspective.
Step No. 3: Prioritize Customer-Valued Processes
Then, using your customer insight data, prioritize those processes customers value most. Often, the insight data will highlight where you have disconnect between your organizational focus on what is important/profitable and your customers’ experience.
Step No. 4: Assign Change Ownership
Give each process an owner, and work cross-functionally to implement changes that will improve the experience. This can be a relatively simple modification, such as packaging changes, paperwork clarity or delivery frequency, that can be scaled easily and without significant cost. Involve suppliers and fulfillment partners to deliver the desired experience.
Step No. 5: Formalize With Service-Level Agreements
A key element to delivering a positive customer experience is to ensure that expectations are set correctly from the start. Whatever changes you make to improve customer experience should be formally documented with customers in a service-level agreement. This has the added benefit of clarifying expectations internally across functions that are working together to deliver a seamless experience for customers.
Step No. 6. Measure as Customer Measures
Measure success the same way the customer measures it. Be sure that any changes are delivering the required benefit. Leading supply chain organizations include some form of customer satisfaction measures in their overall scorecards.
How About Starbuck’s Italian Adventure?
Starbucks clearly struggled to deliver on the customer experience Australian consumers were looking for back in the early 2000s. However, it is taking a far more customer-centric approach to its entry into Italy than it did for the Australian market. Out are the Frappuccinos and in are smaller coffee sizes and an on-site roastery. The first store is being made into a destination for locals and tourists alike. The store had lines around the block for the opening on a recent weekend.
Starbucks has made a great first step in Italy, but it’s only the beginning.
Thomas O’Connor, Senior Principal, Analyst, Gartner Supply Chain Research
Also contributing to this report: Lisa Callinan, Senior Director, Analyst, Gartner Supply Chain Research