We’re all aware of the impact COVID-19 has had on businesses around the globe: Some of the world’s biggest brands, from Hertz and J.Crew to J.C. Penney and Pier 1, have filed for bankruptcy.
While many more have remained operational, they have been forced to pivot their strategies by altering their footprint, closing their locations, and cutting their services. These changes have resulted in “white space”—service gaps that many consumers still want filled.
Starbucks is a perfect example of this.
Founded in 1971, Starbucks became an icon by recognizing an insight that today seems simple: buying and drinking a coffee is a personal experience, not a transactional one. Tailoring their whole approach to retailing around that insight, Starbucks marketed its cafés as a “third place”—a destination outside home and work where consumers are encouraged to meet with friends, do some work, or just relax with a book and their favourite beverage.
In transforming its approach, Starbucks transformed an industry. Now, in the wake of COVID-19, the company must do it again—and it may require abandoning the very strategy that has been so foundational to its success.
Starbucks has made the decision to close more than 200 stores, and, for many remaining locations, shift its service model to drive-thru, pick-up, and curbside pick-up.
This shift away from its core strategy can’t help but minimize Starbucks’ point of differentiation in the market. And while these new formats are likely to be in urban, high-density, high-traffic locations, consumers will inevitably thirst for that welcoming “third place” once again.
This significant move by Starbucks will ultimately leave a valuable brand position “vacant”—providing an opportunity for other companies to fill that consumer need.
And not just coffee retailers: While competitors like Tim Hortons might logically fill this void, banks have been thinking for years about how to make better use of their branches. Could they possibly step into this role? Consider, for example, RBC’s Meeting Place and Experience RBC formats. Perennial | DCM had the good fortune to work with RBC in creating these spaces, and designed them specifically to encourage people to drop by, relax, maybe pop open their laptop, or just charge their phone, even if they have no banking to do.
More traditional retailers might also fill this void—for instance, grocery stores, which are already venturing into more experiential space and store-in-a-store offerings (including Starbucks) in order to better engage consumers and persuade them to spend more time in-store.
In the changing post-COVID retail landscape, there will almost certainly be more of this kind of shifting, as some companies adjust their business models, and other companies adapt to fit these gaps.
Identifying logistical and executional efficiencies will be crucial. As will embracing consumers with hyper-relevant multichannel marketing and communications. Incisive competitive analysis, consumer insights, and strategic guidance will be essential to navigate this evolving market. Moreover, it may reveal entirely novel ways for retailers to build their business, strengthen their brands, and welcome their consumers. Both old and new.