Third Place Displaced
When Michelle Eisen began working as a Starbucks barista in 2010, she loved entering her store every day.
It was always packed with people. She witnessed first dates and reunions and even helped a customer propose to his spouse. Eisen fondly remembers her store in those years as a “cheerful, amazing thing to be part of,” noting that this environment is why so many fellow employees remained working at the store for so long.
But, as any Starbucks regular can tell you, the Starbucks of the past—one filled with comfy couches, a perfectly curated playlist of “coffeehouse hits,” and baristas who doodle your name (albeit often misspelled) on your cup—is vanishing, if not gone already.
The couches have been replaced with cold, metal seating (if a location has seating at all), and the baristas’ personal handwriting has been replaced with printed labels from the POS system.
This transformation reflects the significant evolution in the coffee giant’s identity, one that was already underway but dramatically accelerated by the pandemic and the rise of digital, on-the-go services like mobile ordering and delivery. While these innovations cater to convenience, they have eroded what made Starbucks unique: its purpose as the “Third Place” between work and home, and the strategic narrative it used to position itself as where the community can thrive.
Strategic narratives provide a framework for businesses to adapt to new market realities while preserving the core identity customers love. Every company faces numerous challenges that force it to evolve in order to be competitive. But in order for the company to remain essential, these changes must be anchored in the brand’s story—the essence of why it resonates with its audience.
Starbucks’ original success can be traced to its masterful storytelling. From the start, Starbucks positioned itself as a place where people could escape the hustle of daily life, offering a welcoming environment that combined comfort with a sense of belonging. The coffee was just a perk of being there.
The brand’s first store opened in 1971 in Seattle’s Pike Place Market. Ten years later, businessman Howard Schultz visited and was instantly impressed. After joining the company as the director of retail operations and marketing in 1982, and being inspired by the warmth and artistry of Italy’s coffee culture, Schultz set out to create a different kind of company—and different kind of coffee shop:
“You get more than the finest coffee when you visit Starbucks. You get great people, first-rate music, a comfortable and upbeat meeting place, and sound advice on brewing excellent coffee at home. At home, you’re part of a family. At work, you’re part of a company. And somewhere in between there’s a place where you can sit back and be yourself. That’s what a Starbucks store is to many of its customers — a kind of ‘third place’ where they can escape, reflect, read, chat or listen.”
Schultz took over as CEO in 1987 with the mission to give consumers a distinct opportunity that didn’t exist, especially in suburban and rural markets: a comfortable and aesthetically pleasing place to gather.
As Schultz said in a 1995 industry publication profile, “If you look at the landscape of retail and restaurants in America, there is such a fracturing of places where people meet. There’s nowhere for people to go. So we created a place where people can feel comfortable.”
This “third place” concept formed Starbucks’ brand narrative, differentiating it from other coffee shops and creating a loyal customer base.
Starbucks built its identity around serving not just coffee, but its commitment to creating a welcoming space for everyday individuals seeking a sense of belonging and respite in their busy lives.
This identity was carefully crafted through thoughtful design choices. Every detail, from the couches to the lighting and the music—even the practice of writing names on cups—was intentionally designed to foster connection and make each visit feel personal. Starbucks understood that they weren’t just in the coffee business—they were in the business of creating experiences.
However, as Starbucks has adapted to digital trends and efficiency demands, it has begun to lose the very essence that made it special. The shift to standardized processes and environments has overshadowed its strategic narrative.
A strategic narrative prevents a company from losing its distinct voice amidst evolution. It maintains coherence across all touchpoints—marketing, sales, and customer service—ensuring that the brand remains recognizable and trustworthy to its audience. While tactics, products, and messaging may shift, the underlying narrative must remain steadfast, allowing the company to adapt without losing its identity. Without this commitment to its foundational narrative, Starbucks risks diluting the very connection that initially drew customers to its stores.
Even though the company was initially hesitant to adopt drive-thrus (underscoring that a drive-thru is a way to become “just another commodity product”), it adjusted its priorities to meet consumer needs, opening the first drive-thru location in 1994. By 2005, nearly 15 percent of Starbucks’ roughly 7,300 stores were drive-thru locations.
While the introduction of drive-thru locations boosted the company’s sales, it came at the cost of the in-store experience, with the focus shifting away from creating a welcoming third place for customers.
Starbucks debuted its mobile ordering system in 2014, allowing customers to place pickup orders from their smartphones without having to interact with an employee. This functionality has allowed Starbucks to seamlessly integrate into customers’ daily lives, but has done so at the detriment to both employee and customer experience.
Starbucks baristas have complained about the challenge of keeping up with the demand of additional orders coming in from mobile orders, and the constant flow of people entering and exiting stores negatively impacts the sense of calm customers once felt while sitting at a Starbucks.
As Joe Pine, the co-founder of consultancy Strategic Horizons puts it, “Mobile ordering places you and your in-house order in an invisible queue of indeterminate and sometimes seemingly interminable length.”
This shift toward mobile and drive-thru orders has pushed Starbucks to prioritize volume and efficiency, leading to the commoditization of the brand by disconnecting the barista-customer relationship that once defined its in-store experience. The emphasis on efficiency also diminishes the valuable dwell time that fosters connection and community, dividing the attention of baristas and ultimately increasing the time it takes to fulfill orders.
The COVID-19 pandemic further propelled drive-thrus and mobile pickup orders to unprecedented levels.
The CEO of Starbucks at the time, Steve Johnson, made a statement about how the pandemic would impact the company’s position as a third place, saying, “Starbucks stores have always been known as the ‘third place,’ a welcoming place outside of our home and work where we connect over a cup of coffee. As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers.”
Fast-forward to 2022: the pandemic was by and large over, but Starbucks showed no signs of returning to the Third Place. In a blog post released in September 2022, the company argued that Starbucks has reimagined what the Third Place looks like by investing $450 million in stores with new coffee-making equipment.
The post asserts:
“The Third Place has never been defined solely by a physical space, it’s also the feeling of warmth, connection, a sense of belonging [sic] Starbucks. Digital technology is helping augment and extend that feeling of connection with customers – whether they are in Starbucks stores, in their cars, on their doorsteps.”
Even though the core of Starbucks’ positioning continues to focus on the customer, the fact remains that this does not encompass the Third Place that first brought coffee drinkers to Starbucks. How can the same sense of warmth and belonging customers once felt when they congregated in a comfy couch at their neighborhood store be replaced by picking up a coffee while parked?
While Starbucks has undeniably been forced to change their products and processes to remain competitive, it looks to customers as though they have forgotten what has made them essential in the process.
Starbucks claims the Third Place is not bound to a physical space, but this shift towards convenience has undermined the emotional and social connections that were once key. In prioritizing speed over experience, they’ve struggled to create the same feeling of warmth and community that thrived in their physical stores, leaving customers with a more transactional, less personal interaction.
The consequences of Starbucks straying away from its strategic narrative have been made adamantly clear this year.
In July 2024, global same-store sales declined for the second quarter in a row, down 3 percent, while overall foot traffic fell 5 percent.
In a LinkedIn post from May 2024, written in response to Starbucks’ earnings’ continued decline, now former CEO Schultz echoed the argument that Starbucks needs to refocus on why people come to the store in the first place:
“The stores require a maniacal focus on the customer experience, through the eyes of a merchant. The answer does not lie in data, but in the stores…
…One of their first actions should be to reinvent the mobile ordering and payment platform—which Starbucks pioneered—to once again make it the uplifting experience it was designed to be. The go-to-market strategy needs to be overhauled and elevated with coffee-forward innovation that inspires partners, and creates differentiation in the marketplace, reinforcing the company’s premium position. Through it all, focus on being experiential, not transactional.”
Regardless of whether mobile app improvements will be enough to reverse the revenue decline, the path forward for Starbucks involves a delicate balance: leveraging modern conveniences without sacrificing the unique experience that originally endeared it to consumers.
The good news? Newly appointed CEO Brian Niccol is up for the challenge. Former CEO of Chipotle and Taco Bell, Niccols has earned himself the nickname “fast food’s Mr. Fix-It”—a nod to his impressive track record reviving restaurants in a sales slump.
On his second day as Starbucks’ chief, Niccols released an open letter to employees and customers. The letter emphasized his desire to return Starbucks to its roots:
“We’re getting back to Starbucks. We’re refocusing on what has always set Starbucks apart — a welcoming coffeehouse where people gather, and where we serve the finest coffee, handcrafted by our skilled baristas. This is our enduring identity. We will innovate from here.”
He also acknowledged that some stores can feel “transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic.” He has pledged to focus on “empowering” baristas, ensuring they have “tools and time to craft great drinks.”
Niccols’ ability to reclaim Starbucks’ identity hinges on embracing the strategic narrative that made the brand iconic. By refocusing on creating a “third place” experience—whether through enhancing in-store atmospheres, refining digital interactions, or re-emphasizing the customer-barista connection—Starbucks, with Niccols’ help, may be able to reclaim its distinctive identity.
Maintaining a clear strategic narrative while adapting to market shifts is essential for preserving brand identity. Companies must balance innovation with a commitment to their core values and unique customer experiences. Just as Starbucks is grappling with the challenge of modernizing without losing its original essence, other brands must ensure that their adaptations—whether through digital advancements, operational changes, or more—align with their foundational narratives. By staying true to their core identity and fostering genuine connections with their audience, brands can navigate change effectively and sustain long-term loyalty.
Anya Reiser is a Senior Engagement Team Lead at Woden. Read our extensive guide on how to craft your organization’s narrative, or send us an email at connect@wodenworks.com to uncover what makes you essential.