Starbucks' implementation of Wi-Fi networks for sales and operational efficiency

Starbucks and Wi-Fi

Starbucks and the Benefits of Wi-Fi

This essay examines the benefits to Starbucks of implementing a Wi-Fi network.

Summary of the Case

At the time the case study was written, Starbucks had grown to be the world's number one specialty coffee chain with about 6,500 outlets in 25 countries. Starbucks started to provide Internet access in the stores that it owned, with about 60% of 3,645 stores in the U.S. having Wi-Fi hotspots. Hoping to acquire Starbucks customers, Deutsche Telekom's T-Mobile USA unit provided T-Mobile Hotspot service at Starbucks. AT-Mobile Hotspot account could also be used for wireless Internet access at other locations, such as Borders Books & Music stores, Fed Ex Kinko's stores, airports and selected Hyatt Hotel locations in the U.S.

Starbucks benefitted from the T-Mobile powered network in a number of ways. Starbucks internal research showed that T-Mobile Hotspot subscribers visited stores more often and stayed longer each time. Starbucks also believed that the Wi-Fi networks would generate new sources of revenue from such sources as selling music downloads and entertainment videos in their cafes.

In addition to boosting sales, Starbucks' Wi-Fi networks were also responsible for improving Starbucks' business processes. The networks were expected to increase profits by enabling more sales per minute by reducing the time for clearing credit card sales at the cash register and by enabling interactive training delivery to local stores from a central server.

The Wi-Fi network also helped Starbucks to improve its store operations as well. Starbucks managers began using the wireless service to create wireless local area networks (WLANs) to help run store operations provide wireless access to the company's private corporate network and systems. Starbucks began equipping its district managers with Wi-Fi enabled laptops to take advantage of wireless networks.

Starbucks manager Lisa Jansen was responsible for 10 stores near Portland, Oregon. She no longer needed to drive to Starbucks regional headquarters after visiting each store and reviewing its operations. Instead, Jansen worked from each store, filing reports, ordering supplies and sending e-mail, thereby saving up to 10 hours per week in commute time.

Similarly Artie Dohler, who managed several Starbucks in the New York Times Square district, saw his productivity improve enough to increase the number of employees he managed from 100 to 115. He also improved employee training and cut his employee turnover by two-thirds, all due to his increased productivity thanks to wireless networking. As a result of implementing Wi-Fi, Starbucks was able to increase the presence of its district managers by 25% without adding any additional managers.

Statement of the Problem

Starbucks faced two problems: how to increase sales and how to increase the profitability of its operations. Like almost all companies, Starbucks was looking for ways to grow sales. They wanted to attract more customers and increase average sales per customer, both of which would lead to increased total sales.

In addition to generating more revenues, Starbucks wanted to make its operations more efficient, thereby driving down costs and driving up productivity. Starbucks was looking for faster credit card processing, improved training delivery and increased productivity for store managers.

Learning Application

This case study demonstrates the use of technology to solve multiple business problems. By installing Wi-Fi Hotspots and WLAN technology at its stores, Starbucks was able to achieve both increased revenue and increased operational efficiency. Wi-Fi Hotspots served to increase store traffic, thereby driving up the total number of sales and the average sale per customer. The same technology also increased the efficiency and speed of the credit card transactions and enabled training delivery. Likewise, Starbucks managers benefitted from the flexibility of being able to work from each store, rather than their regional headquarters or office. The savings in commute time and the increase in efficiency translated into more time spent coaching and developing their employees, with improvements in employee turnover and customer service.