Business Model of Starbucks | How Starbucks is different from its Competitors

Pratyusha Srivastava Pratyusha Srivastava
Sep 1, 2021 6 min read
Business Model of Starbucks | How Starbucks is different from its Competitors

Thinking about coffee? Yeah me too! And when it's about coffee, no one can beat Starbucks! The most delicious American coffeehouse and company. But what keeps this company incredibly successful?

So, to bring a better perspective towards the business model of Starbucks, we have presented this article for you. Starbucks was based in Seattle, Washington, and started to nurture people with the pleasure of coffee at a time. And today, this coffeehouse is established in more than 30,000 places across the globe.

Starbucks is a choice for all! Through this article, we would get to know all the essential strategies of Starbucks business model and how the company operates and makes money. We will discuss the strategies, plan, and revenue model. But most importantly, we will know what's unique about the Starbucks business model that keeps it at the top. Let's get started!

About Starbucks
Where does Starbucks operate?
Key Product and Services of Starbucks
Target Audience of Starbucks
Business model of Starbucks
What is unique about the business model of Starbucks?
The Gold Card Reward by Starbucks
How does Starbucks make Money?
FAQ

About Starbucks

The American based multinational chain of coffeehouses, Starbucks is headquartered in Seattle, Washington. Starbucks is responsible for the utmost coffee culture in the United States.

The coffeehouse was founded by Jerry Baldwin, Gordon Bowker and Zev Siegl in 1971 (around 50 years ago). Starbucks was widely welcomed by Americans in their coffee culture. And now, Starbucks is well-established in around 32,660 places across the world, as of 2020. It serves over 83 countries worldwide.

Starbucks is well known for serving utterly delicious hot and cold drinks, whole-bean coffee, various instant flavoured coffee including espresso, latte, and others. It also serves loose-leaf teas such as Evolution Fresh juices, Frappuccino, and many others. La Boulange pastries and other snacks as well. Moreover, Starbucks offers tons of different customer based offers like free Wi-Fi and many others.

Where does Starbucks operate?

Starbucks is widely famous and well established in around 83 countries with a total of 29,865 stores (including the licensed shops & kiosks and company based retail outlets) across the world. In the United States, Starbucks has around 14,758 outlets, in Canada 1,542, in China 3,684, in Japan 1,414 and so on.

Key Products and Services of Starbucks

Starbucks mainly focuses on better interaction with its customers. Therefore, it offers its key services such as communication for a better connection with audiences. The bond between customers and the coffeehouse becomes very strong. And Starbucks always gets the best relationship throughout.

This also encourages a calm and relaxing environment inside Starbucks' stores. They aim to touch the inner soul of their customers. And in such a manner, the consumers always come back for more coffee and snacks.

Target Audience of Starbucks

The world-famous chain of coffeehouses, Starbucks targets its audience through demographic segmentation. It mainly targets people aged 25-44 years. This rounds up around half of the total business revenue.

The next large target group is young adults around the age of 18-24 years. Through these major groups, Starbucks earns a great source of revenue. And these together bring around 40% of total Starbucks' sales.


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Business model of Starbucks

The business model of Starbucks is entirely based upon the company the offer provides to its customers and architecture and networking partner for the creating, delivering and marketing value formulated from valuable revenue streams.

Starbucks' business model is well designed to make the business work and also, how it can make more profit. Starbucks gathers its value through incredible customer interaction and experience.

Starbucks gives people the pleasure of drinking coffee. It creates a calm and relaxing environment for its customers with great quality beverages in its coffeehouses. Starbucks has always been pretty creative in its business methods and strategies.

It offers instant on-time delivery to its customers, consistently. Now that we have the basic idea of the business model of Starbucks, let's get our minds to what is unique about its business model and how it actually makes money.

What is unique about the business model of Starbucks?

Starbucks has opted for the most creative and unique marketing strategies. It has received immense success through its business model and strategies. But the thing that makes the business model utterly unique is the Classic Logo which works best to engage more loyal customers throughout. The concept of the logo is to gather a huge audience base.

Starbucks CafΓ©
Starbucks CafΓ©

The other thing is how it presents its advertisements to its customers. With its store, modern cup design, digital content and many others, it provides the customers with a feeling of warmth and comfort. That's why the audience connects more with Starbucks.

The Gold Card Reward by Starbucks

Gold Card Reward
Gold Card Reward

There was a time in 2008 when Starbucks was going through some really hard times. And that's when Howard Schultz was re-appointed as the CEO of Starbucks, who took the company with some very remarkable alterations.

Schultz's most incredible initiative was the reward system. In this, the customer deposits some money in their Starbucks account and when you use the money for buying coffee, the company rewards you.

This became the most successful plan and around 41% of Americans preferred the Starbucks app for payments. And whenever the customer buys any beverages, they indirectly lend money to Starbucks at a 0% interest rate.

The money earned through this plan was invested into different ventures, for the upgradation of the company. The most incredible thing about this reward system is that the customer can only use the money to buy coffee from Starbucks and through this, there is a never-ending financial deal with the customers.


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How does Starbucks make Money?

Starbucks revenue model is categorized into three portions that are, operated stores, licensing fees from licensed stores, and another channel growth. A large fraction of revenue comes from the company-operated stores. According to a report of 2018, around 80% of total revenue comes from this segment only.

Net revenue of Starbucks worldwide
Net revenue of Starbucks worldwide

The next is the licensed stores. Although this does contribute much (11% to the total revenue) but is known to be very popular. The licensed stores hold lower margins and high operating margins as compared to the company-operated stores. These licensed stores sell tea, coffee, snacks and other Starbucks products and generate royalties and license fees for Starbucks.

The third source is sales of packaged tea, coffee and other instant beverages to the customers, outside the company-operated and licensed stores. Also, some premium coffees, Food items, Whole bean Coffees and others. Β 

Starbucks Packaged Coffee
Starbucks Packaged Coffee

Moreover, Starbucks also sells a few coffee machines and equipment like an espresso machine, coffee brewers and others to the licensed stores generally.

Conclusion

Starbucks business model is quite known for its strategic deals and promotions. Their business model is utterly successful and always finds more customer engagement. It puts a good impact through its licensed and company-operated stores. It works with simplicity and stands up to its ethics.

Today, Starbucks is a well-established company with a huge audience base. The business model of Starbucks shows that with utter determination and hard work, you can achieve everything in your hand.

FAQ

What is the revenue of Starbucks?

Starbucks had a net revenue of 19.16 billion U.S. dollars in 2020.

Who is the founder of Starbucks?

Gordon Bowker, Jerry Baldwin, and Zev Siegl founded Starbucks in 1971.

Is Starbucks owned by Tata?

Tata Starbucks Private Limited is a joint venture company owned by Tata Consumer Products and Starbucks Corporation.

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