Wi Fi and a Coffee
Starbucks now offers its customers wireless access to the Internet in most of its U.S. stores and expects to have the service in some 2,700 locations by the end of this year.
story on Stores
On the Menu: Latte, Biscotti and Wi Fi
Starbucks teams with HP and T Mobile to provide patrons with anywhere, anytime wireless Internet access
By MICHAEL HARTNETT
Michael Hartnett is a Brewster, N.Y.‑based business writer.
Starbucks Coffee joined the ranks of Fortune 100 companies on the strength of its ability to provide an excellent cup of coffee, in seemingly limitless variations, to millions of happy customers who make the retailer�s comfortable coffee houses a part of their lifestyles.
But the appeal of Starbucks extends beyond a few quiet moments of coffee, confections and contemplation. In fact, many loyal customers have come to view the stores as convenient places to get some work done, especially if one of the company�s 3,500 locations is closer than their own offices.
That explains why Starbucks now offers its customers wireless access to the Internet in most of its U.S. stores and expects to have the service in some 2,700 locations by the end of this year. Simply stated, Wi Fi (wireless fidelity capability) allows patrons who have a wireless card in their notebook computer or PDA to gain access to the Internet while sipping a latte and munching a biscotti at Starbucks, all without the aid of a hardwire connection.
The demand for anywhere, anytime Internet access isn�t limited to a handful of computer geeks. Research conducted by Starbucks shows that its stores are a magnet for traveling salespeople, real estate agents, students and many other demographic groups who seek out their favorite coffee house as a place to do real work and keep in touch with headquarters. For those customers, Starbucks and the Wi Fi network have become an important productivity tool.
�The inspiration for us to form a relationship with HP and T Mobile to create a wireless network was to make Starbucks a better place to be for our customers,� explains Lovina McMurchy, director of Y5 business and alliances for Seattle based Starbucks. �We have 20 million customers, and they tend to be high income and managerial. They are twice as likely to have a cell phone and a laptop. A large number of them have PDAs.�
Although HP and T Mobile put Starbucks at the forefront of wireless services to customers with an initial launch in summer 2002, McMurchy says that for some time Starbucks customers had been asking if they could have convenient access to the Internet as a side order to their coffee and snack.
�Starbucks is a comfortable, relaxing environment where our customers do work. For quite a few years we have had comments from them about hooking up to the Internet,� McMurchy explains. �For us, that was the inspiration � making Starbucks a better place to be for our customers.�
HOTSPOT SERVICE
This Wi Fi access for Starbucks customers and company employees was made possible through the retailer�s partnership with HP (formerly Hewlett Packard), headquartered in Palo Alto, Calif., and T Mobile USA, based in Bellevue, Wash.
The required hardware includes a server and router at individual stores, and a wireless card in the customer�s laptop or pocket PC. The system is backed up by high speed T1 connections from T Mobile that provide the hotspot service. The service allows Starbucks customers to visit the web, check their e mail and, if they choose, watch streaming video or download multi media while sipping their coffee. The wireless high speed connection is 40 to 50 times faster than standard dial up Internet access.
To sweeten the deal, T Mobile is offering Starbucks customers a free, one time, 24 hour trial of the service with a new qualifying subscription. For Starbucks, the Wi Fi access is a customer service that�s delivering an almost immediate payback.
�When store comps increase, it�s sometimes hard to know what drives them, but at Starbucks we have found strong same store comps of 10 percent, and those are coming on top of strong comps from previous years,� says McMurchy, noting that the company�s senior managers attribute the gains to the hotspot service, as well as other company programs.
A Starbucks customer survey seeking comments about how the new service has affected their frequency and duration of stays reveals that 40 percent of those who use the service do visit more often and a larger number stay longer.
�There is a clear acceleration in the adoption of new technologies as people have to do more with fewer resources and are expected to be more productive,� says Leigh Morrison, HP�s vice president of retail sales and solutions, U.S. �I would equate wireless technology to ATMs and cell phones. The adoption rate of cell phones was so much quicker than ATMs, and the adoption rate for wireless will be faster than for cell phones. Within the next year or two, wireless penetration will be at least 50 percent more than it is today.�
Through HP�s relationship with Starbucks and T Mobile, the company is building critical mass for wireless networks, and Starbucks, with its thousands of store locations in the United States and internationally, is part of that foundation.
�As a company, Starbucks still has room to grow, even in the U.S., and we want to be there with them. It�s a foundation for us, not only in the retail segment, but also in airport clubs and the hospitality sector,� says Morrison. �As wireless technology continues to improve and people become more secure in it as an environment, it will continue to grow. It�s still in its experimental stages in supermarkets and foodservice, but wireless is probably going to be a better fit with the hospitality industry.�
Morrison cites the new open air shopping center in Santana Row, adjacent to the Hotel Valencia in San Jose, Calif., as one example. With HP teaming up with Cisco Systems to wire the whole area in and around the hotel and the shopping center, shoppers and hotel guests � inside the hotel or outside � can log on to the Internet whenever or wherever they choose. Morrison suggests that such Wi Fi access could soon become the norm, rather than the exception.
GET ON BOARD
Although Starbucks appears to be leading the pack in making wireless Internet access available at thousands of locations, it�s clearly a bandwagon that has attracted many other retailers that are now running to get aboard.
McDonald�s, for example, announced this summer that it is offering high speed wireless access for its customers in some 100 restaurants in the Chicago and Milwaukee markets. This expansion follows similar launches under the Golden Arches in the San Francisco Bay area and New York. The retailer teamed up with Toshiba�s Computer Systems Group and Intel to provide the service.
Panera Bread, based in St. Louis, is offering the same access in 70 of its bakery caf� locations, with plans under way to equip the rest of its 505 company owned and franchised locations. Panera has separated itself from other providers by offering the service free, rather than as an introductory offer.
Other companies joining the Wi Fi bandwagon include Schlotzsky�s Restaurants, Steaming Bean Coffee Shops and The Lassiter at North Hills shopping center in Raleigh, N.C., whose tenants include Starbucks and Schlotzsky�s.
As a practical matter, Starbucks must devote the vast majority of its store space to customer seating and the preparation and serving of coffee and other products. However, McMurchy says that the company recognized that it will be bringing in new technologies during the next five years, so Starbucks carved out several square feet of valuable back of the house space for the hardware.
�We put in some 6 ft. high racks to house the wireless hardware and some other technology that we see coming in future years,� she explains. �At Starbucks, we view ourselves as not just being in the coffee business. We are in the experience business. We have long known that Starbucks is a place where people meet to work and relax, and this hotspot service takes that to a whole new level.�
The Wi Fi system�s benefits also have another dimension: increased productivity among the company�s 600 district managers. �We have used this wireless network to improve the efficiency of our own workforce. There are two sides to it: there�s the enhanced service to our customers, and there�s our own district managers who have to stay connected to the corporate network,� explains McMurchy.
�HP was our partner in launching the service to our district managers, each with 10 to 12 locations. They spend a lot of time on the road and were not able to stay connected with the functions they needed to take care of while traveling,� McMurchy continues. �Our district managers are now connected to the Wi Fi network and they say it�s the best thing Starbucks has ever done. It�s saving a lot of travel time and become an important productivity tool.�
Posted by Craig at October 15, 2003 08:10 PM