Page 27 - Introduction to Electronic Commerce and Social Commerce

4 1 Overview of Electronic Commerce and Social Commerce

The Problem Loyalty Program
Like airlines and other vendors, the company offers a Loyalty
Starting in 2007, the company’s operating income declined Program (My Starbucks Rewards). Those who reach the gold
sharply (from over $1 billion in 2007 to $504 million in 2008 level receive extra benefits. The program is managed elec-
and $560 million in 2009). This decline was caused by not tronically.
only the economic slowdown, but also by the increased com-
petition (e.g., from Green Mountain Coffee Roasters), which Mobile Payments
intensified even during the recession. Excellent coffee and Customers can pay at Starbucks stores with prepaid (stored
customer service helped, but only in the short run. A better value) cards, similar to those used in transportation, or pay
solution was needed. using the Starbucks mobile app from smartphones. Shoppers
Starbucks realized that better interaction with its custom- can download an app on their mobile device. Payment is
ers was necessary and decided to solve the problem via made by selecting “touch to pay” and holding up the barcode
digitization. on the device screen to a scanner at the register. The system
is connected automatically to a debit or credit card. The sys-
tem works only in company-owned stores.

The Solution: Going Digital and Social
Social Media Projects
In addition to traditional measures to improve its operation
and margin, the company resorted to electronic commerce, Starbucks realized the importance of social media that uses
meaning the use of computerized systems to conduct and Internet-based systems to support social interactions and user
support its business. The company appointed a Senior involvement and engagement (Chapter 7). Thus, it started
Executive with the title of Chief Digital Officer to oversee its several initiatives to foster customer relationships based on
digital activities. It also created the Digital Venture Group to the needs, wants, and preferences of its existing and future
conduct the technical implementation. customers. The following are some representative activities.

The Electronic Commerce Initiatives Exploiting Collective Intelligence

Starbucks deployed several e-commerce projects; the major My Starbucks Idea (mystarbucksidea.force.com) is a plat-
ones follow. form in which a community of over 300,000 consumers and
employees can make improvement suggestions, vote for the
Online Store suggestions, ask questions, collaborate on projects, and
Starbucks sells many of their products online at store. express their complaints and frustrations. The community
starbucks.com. These offerings include coffee, tea, and generated 70,000 ideas in its first year, ranging from thoughts
Starbucks equipment and merchandise. The store was in on the company’s rewards cards and elimination of paper
operation for years, using a typical shopping cart (called My cups to ways to improve customer service. The site also pro-
Bag), but in August 2011, the company completely rede- vides statistics on the ideas generated, by category, as well as
signed the webstore to make shopping more convenient and their status (under review, reviewed, in the works, and
easy. In addition, customers (individual or companies) can launched). The company may provide incentives for certain
schedule deliveries of standard and special items. Customers generated ideas. For example, in June 2010, Starbucks
can order rare and exquisite coffee that is available only in offered $20,000 for the best idea concerning the reuse of its
some U.S. stores. Finally, online customers get exclusive used coffee cups. This initiative is based on the technology
promotions. of collective intelligence, also known as crowdsourcing (see
Chapters 2 and 8), and is supported by the “Ideas in Action”
The eGift Card Program blog. This blog is written by employees who discuss ideas
Customers can buy Starbucks customized gift cards digitally submitted to blogs.starbucks.com/blogs/Customer.
(e.g., a gift card for a friend’s birthday is auto delivered on
the desired date). Payments can be made with a credit card, Starbucks’ Activities on Facebook
through PayPal, or the Starbucks app for mobile devices. The
gift card is sent to the recipient via e-mail or postal mail. Starbucks maintains a strong social media presence on
The recipients can print the card and go shopping at a Facebook (facebook.com/Starbucks), with over 36 million
Starbucks physical store, transfer the gift amount to their “Likes” (as of March 2016). The company uploads videos,
Starbucks’ card, or to a Starbucks gift card. blog posts, photos, promotions, product highlights, and