A joint Starbucks and Amazon Go store has opened in New York on 59th Street between Park and Lexington avenues. It’s the first time that 2 brands have joined forces to open a common sales outlet. You will find in this article some pictures taken during a visit to the store at the end of November 2021. Many thanks to Olivier Delangre, Amoobi’s CEO, for sharing his photos and analysis for this article.
Starbucks and Amazon Go: the hidden side of a co-branding
Co-branding operations are not unusual in marketing. But it is unheard of for two such powerful brands to join forces in a physical sales outlet.
This operation corresponds to a convergence of interests between Starbucks and Amazon:
- Starbucks announced that it wanted to convert 400 underperforming stores into pick-up points. The order must be placed via the Starbucks application and collected at the counter.
- Amazon is pursuing a very proactive strategy of setting up its stores and deploying its Just Walk Out technology. This technology is implemented in particular in Amazon Go but also Amazon Fresh.
These two were made for each other ?
Starbucks/Amazon Go: visit of the store
The sales outlet is a Starbucks pick-up location combined with an Amazon Go. It also has a seating area. The Starbucks drink (or accompanying cookie) can only be pre-ordered via the Starbucks app and picked up at the counter. The coffee preparation part is in a room in the back. The barista is therefore no longer in front of the customer.
The customer can then walk away or enter the Amazon Go section. They must then go through the gantry with a credit card, the Amazon app or the Amazon One, which works with palm recognition. To learn more about palm recognition, we refer you to this article.
The Amazon Go part proposes Food & Drinks and snacks to take away and sandwiches and hot meals for the different moments of the day. In the Amazon Go part, you can also find Starbucks products to go. These products were previously in the queue of the classic Starbucks store. So, this is an attempt to limit cross-selling.
The consumer space is the marketing trap set for the consumer. The customer can walk in, sit down and help himself whenever he feels like it. Everything is within reach, and nothing seems to cost anything… but that’s just an illusion that can be costly. This sitting/standing transition creates an objective complexity for Amazon’s technology since it is necessary to constantly follow the customer (even when he is sitting and therefore immobile).
The downside is that the Starbucks order must always go through the application, even in the store. The integration between the two brand worlds is therefore not complete.
Marketing strategy analysis: 3 types of synergies
The first thing to note is that this is a partnership of equals. We are not dealing with a “corner” within a store, but with 2 sales outlets that take advantage of synergies:
- technological synergies
- synergy of customers
- space synergy
Beyond the co-branding operation, the idea behind this unique partnership is, of course, to increase profitability per square meter through cross-selling. Starbucks acts as a magnet, and when customers are inside, they can sip their coffee in peace and indulge in a bit of sweetness. Amazon’s technology allows for lower sales costs per item. Indeed, there is a broader assortment than in a classic Starbucks for a much lower maintenance cost (no employees).
In the end, both brands win: Starbucks focuses on what it does best and optimizes its fixed costs per drink served. The space freed up is entrusted to Amazon, which makes it profitable by:
- automating the sale
- drastically increasing the number of items per square meter
- lowering the barriers to purchase by eliminating the need to go to the cash register
In conclusion, this partnership is, on paper, absolutely ideal.
The opinion of Olivier Delangre, CEO of Amoobi
Once again, Amazon amazes me with its ability to invent new experiences constantly. I find the association between Amazon and Starbucks very interesting. They are two iconic brands that attach importance to the customer experience. Starbucks is renewing its promise to be the ‘third place’, the place outside the home or work where you can meet and be part of a community. I was also surprised by the sleekness of the Starbucks counter, offset by the snacking offer proposed in the Amazon Go. I think it’s finally a great combination, the space and the Starbucks coffee, a modern place to work without being all alone, and the simplicity of the Amazon Go store to have everything you might need at all times. As mobile or remote working becomes more common, Amazon and Starbucks innovate and adapt by proposing this beautiful space!
Posted in Marketing.