Starbucks plans on closing pick-up only locations in an attempt to bring people back to the coffeehouse. Photo credit: Engin Akyurt
Starbucks wants guests to stay awhile. The company’s new CEO, Brian Niccol, launched a turnaround plan shortly after taking charge in August 2024, aiming to revive the coffee giant after several years of flagging sales and competition from nimbler rivals such as Dutch Bros and Luckin Coffee.
Sales fell in the previous two quarters before Niccol was hired, as customers complained of high prices and long wait times. During his predecessor Laxman Narasimhan’s 16 months in charge, the brand’s stock price fell 22% on the back of a string of lackluster earnings reports.
Niccol’s pitch to change Starbucks' fortunes: instead of the mobile- and convenience-focused company that Starbucks had become in recent years, the new CEO wanted to return to a time when the brand was a welcoming coffeehouse. In a letter to employees soon after starting the job, Niccol wrote: “We have an opportunity to make the store experience better for our partners and, in turn, for our customers.”
Among the changes were moves to simplify its sometimes complex menu, bringing back condiment bars, and adding more comfortable seating. Niccol also announced that Starbucks would hire more workers and scale back its automation plans. “What we’re discovering is that it’s not the equipment that solves the customer experience that we need to provide, but rather the staffing of stores and the deployment of the technology behind it,” Niccol said during a call with Wall Street analysts in May.
Has the plan worked? It might be too soon to say, although earnings reports since the “Back to Starbucks” launch have been less than promising. Analysts interviewed by Restaurant Dive said that Niccol’s changes would take time to implement and be reflected in sales figures.
The company, however, is doubling down, recently announcing that it would be closing all its pickup-only stores in 2026. Starbucks launched the small-footprint, mobile ordering-focused range of stores in 2019, right at the beginning of its shift toward the quick-service model. A similar format inspired the stores in China, where the company opened an express, mobile-only “Starbucks Now” store that appeared designed to compete with Luckin’s similarly stripped-down, tech-forward approach.
With the onset of the Covid-19 pandemic, Starbucks hastened the rollout of these contactless stores as they “naturally allow for greater physical distancing,” then-CEO Kevin Johnson said at the time.
There are currently around 90 pickup-only Starbucks locations in 20 US states, with many located in airports and hospitals. However, in an earnings call in July, Niccol said, “We found this format to be overly transactional and lacking the warmth and human connection that defines our brand.” These locations will either be closed down or converted into more traditional stores.
Starbucks isn’t getting rid of mobile ordering — the company said that 31% of transactions go through its app — but closing down pickup-only stores aligns with Niccol’s overall plan to make stores more welcoming.
The most recent earnings report was more positive, beating analysts’ predictions despite a 2% drop in global sales and a sixth straight quarterly drop in US sales. Only time will tell whether this is the start of a longer-term turnaround, but Niccol remains bullish. In a press release announcing the fiscal results, Niccol said, “We are making tangible progress in our ‘Back to Starbucks’ strategy.” He added, “Based on my experience of turnarounds, we are ahead of schedule.”