Starbucks Bets on Baristas Over AI to Enhance Customer Experience and Boost Efficiency

Starbucks is prioritizing human baristas over artificial intelligence (AI) to tackle its customer service crunch. Unlike competitors like Wendy’s, which uses AI for drive-thru orders, and Chipotle, which employs machines for food preparation, Starbucks is focusing on increasing the number of shifts and hiring more staff to enhance the customer experience and efficiency. In its latest earnings report, Starbucks announced plans to add more shifts for baristas over the next few months, addressing the issues that have arisen from the use of automated systems. CEO Brian Niccol revealed that the company had been investing in equipment and process improvements, such as the Siren System, to speed up the production of cold beverages. However, these efforts haven’t yielded the desired results, and now Starbucks is shifting its strategy to prioritize labor investments. Niccol stated, “We’re finding through our work that investments in labor rather than equipment are more effective.” This means that additional workers will help with tasks like greeting customers, personally handing off orders, and being available for customer questions and requests. These personal interactions, according to Starbucks, contribute to the memorable, more personal moments that their community coffeehouses aim to provide. During a trial run earlier this year, which involved 700 stores, Starbucks observed a growth in transactions. The company is confident that the new labor model and a complementary algorithm to optimize drink-making processes will improve efficiency. By the end of September, this approach is expected to be implemented in about 3,000 U.S. stores. However, the decision to invest more in people comes with its own set of challenges. Some baristas, speaking anonymously due to fears of retaliation, reported feeling overwhelmed and overworked, particularly during peak times when the number of orders placed through the Starbucks mobile app surges. An employee from a store in New Mexico noted that the current conditions could deter potential job applicants due to the perception of being undercompensated. A barista from Ohio welcomed the additional staffing, mentioning that their store relies heavily on the manager stepping in during busy periods. Meanwhile, a North Carolina employee expressed skepticism, highlighting ongoing struggles with retention due to recent changes in Starbucks’ dress code and continued understaffing. The additional investment in labor has financial implications. Starbucks’ shares dipped by about 7% following the announcement, indicating market concerns about the increased costs. To offset these expenses, the company plans to implement zero-based budgeting, a method that requires managers to justify every expense rather than defaulting to the previous year’s budget. Industry insiders, like R.J. Hottovy, head of analytical research at Placer.ai, support Starbucks’ strategy. Hottovy noted, “At the end of the day, it’s really your employees that make the experience,” and pointed out that visits to Starbucks stores declined by 0.9% in the first quarter. He believes that better customer service and a more engaging in-store experience could attract more frequent visits. Sujay Saha, founder and president of Cortico-X, a customer experience consulting firm, acknowledges that Starbucks’ focus on personal connections can be valuable. However, he also points out that some customers prioritize quick, efficient service, suggesting that a balanced approach might be necessary. Starbucks, founded in 1971 and headquartered in Seattle, Washington, is a global leader in the coffee and tea market. The company’s commitment to enhancing the in-store experience reflects its understanding of customer needs and its strategic vision to differentiate itself in an increasingly automated industry. By doubling down on its barista workforce, Starbucks aims to create a more welcoming and efficient environment, fostering customer loyalty and driving business growth.