Starbucks (SBUX) noticed a worrisome trend last holiday season: Online purchases cut into the foot traffic at retail stores, and that meant fewer latte breaks for harried shoppers. Same-store sales growth slowed. Based on back-to-school trends, the coffee giant doesn’t expect this holiday to be any better.
But this time around Starbucks has a plan to become a holiday shopping destination in its own right. The company will launch 100 different designs for its gift cards and cups in a bid to become more of a source for stocking stuffers instead of just a caffeine pit stop.
The gift cards in particular are likely to attract interest. “Starbucks benefited enormously from the consumer shift toward gift-giving cards instead of traditional physical goods,” Starbucks Chief Executive Howard Schultz told analysts recently. One in eight Americans received a Starbucks gift card last year, he said. The $1.4 billion loaded onto gift cards was equal to roughly one-third of the company’s global revenue in the fourth quarter.
Currently all merchandise, which includes mugs, cups, and coffee-making equipment, accounts for about 3 percent of Starbucks sales. With the 100 new designs, the company will have far more mugs in stock for the holidays than in years past. Stores that have the space will display all 100 of them.
The new designs are the work of Starbucks in-house creative studio in Seattle, a group of roughly 150 people who are part of the company’s marketing department. They handle everything from graphics to event design.
“This is the first time we’ve done anything like this,” says Jen Quotson, Starbucks vice president of global creative, who heads merchandise design. “We understood there was a shift in consumer behavior, and we wanted to really reconsider and reinvent holiday. We started with personalization and gifting, and everything we did was built around that.”
Starbucks has been thinking of ways to boost sales as its retail neighbors continue to struggle. Schultz admits the company was somewhat surprised: “We saw the downturn in physical traffic, but we did not anticipate seeing it in the fall,” he said. “We anticipated and we prepared for it for the holiday season.”
