W I R E L E S S S O C I E T Y
Starbucks Unwired
The coffee chain has been serving up wireless Web access at its stores for more than a year now. So why aren't more people using it?
By Anita Hamilton
November 3, 2003
On a recent Sunday afternoon, the Starbucks coffee shop at
Piper's Alley in Chicago's Old Town was packed with
twentysomethings talking on cell phones, poring over books and
newspapers or just dozing off in the store's soft, overstuffed
armchairs. At a tiny table next to the window, Trevor Ulbrick, a
law student at Northwestern University, tapped away on his Apple
PowerBook while listening to a CD through big, cushy headphones
that practically enveloped his head.
Ulbrick, 28, wasn't there for the frothy $3 lattes or even the
shop's mellow atmosphere. He came for the high-speed wireless
Internet access--and he's willing to pay $30 a month to get it.
"I would not be here if they didn't have wireless," he says. "I
don't like Starbucks coffee. Honestly, I don't like their
pastries either--although I'll buy a cookie so I don't feel too
unethical."
Penny-pinching students like Ulbrick aren't exactly what
Starbucks had in mind when it partnered with T-Mobile last year
to roll out wireless Internet access in its shops across the
country. Now with more than 2,600 Starbucks stores equipped with
wi-fi, the duo has created the largest public wi-fi network in
the U.S. It is also among the first to test consumers' appetite
for paid wireless access outside the home.
The plan was simple: lure droves of tech-savvy customers into the
shop with wi-fi, then ply them with grande lattes, oversize Rice
Krispies treats and other high-priced snacks. But while the wi-fi
hot spots have added modestly to Starbucks' cachet, they have
generated less buzz than a cup of decaf. And some Starbucks
watchers doubt that they will add much of anything to the
company's bottom line. "I don't think it is ever going to be a
hugely profitable enterprise for Starbucks," says InStat/MDR
analyst Mike Wolf. Pyramid, an analyst firm, predicts that the
monthly wi-fi revenue per customer for all public hot spots
around the globe will plummet from $30 today to just $3 in 2008.
Starbucks shrugs off such dire predictions. "Analysts love the
doom and gloom," says Lovina McMurchy, director of Starbucks
Interactive. "We believe there is money in wi-fi," she insists.
This past summer Starbucks CEO Howard Schultz even pointed to
wireless as a factor contributing to the company's $410 million
in revenues in June 2003, a 27% increase compared with $323
million in June 2002. Neither Starbucks nor T-Mobile will say how
many people are using the service or how much money the venture
has actually made.
To see for ourselves, TIME sent reporters to four stores that the
chain identified as being especially popular among wi-fi users.
And while we found lots of people using notebook computers, few
were online. For example, at the Astor Place store in New York
City, there were more than 100 customers one Sunday night,
including 15 with laptops--but only three said they were using
Starbucks' wi-fi service.
So will wireless ever pay off for Star-bucks? It's hard to say.
After all, who would have predicted that we would be queuing up
every morning to hand over $3 for a cup of coffee? If Starbucks
can manage that trick, perhaps it can make wi-fi profitable too.
But one thing is almost certain: relying on cash-strapped
students isn't likely to work. Trouble is, the much sought-after
mobile professionals who can afford the wi-fi fee also prefer a
more private space where they can conduct business and talk on a
cell phone in peace.
But there is one group of road warriors for whom wireless works
well: Starbucks' employees. Before wi-fi, the 600 regional
managers--all of whom work with laptops--had to drive back to the
office every day to file reports and order supplies for the six
to 10 shops that each of them oversees. Now they can do all that
during their store visits. The company says wi-fi has increased
its managers' presence in stores as much as 25%, since they spend
less time shuttling back and forth from the office.
And Starbucks is betting that what is good for its managers will
be good for a lot of other mobile professionals. Suzie Gruber,
37, a user-interface consultant for a company that is developing
applications for the construction industry, says she spends six
hours a week at Starbucks. She's constantly on the road meeting
with clients, and whenever she needs to go online she just drops
into the nearest Starbucks anywhere between Los Angeles and San
Francisco. "I'm a lot more efficient now," she says, since she
can reply to e-mails during the day instead of waiting until she
gets home.
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