Research Paper: Online Retail in the Canadian Coffee Market

Target market Canadian Coffee Drinking Study revealed that about 81% of Canadians over the age of 18 drink coffee occasionally and over 63% of drink coffee on a daily basis making coffee the # 1 beverage choice of adult Canadians. Coffee consumers include men and women almost in equal proportion, with men drinking slightly more coffee. Average daily consumption of coffee among Canadian coffee consumers amounts to 2.6 cups. The major portion of coffee is consumed at home – 66%, 16% – at eating places, 12% – at work, and 5% is consumed in other places such (e.g. hospital, schools, hockey rinks and other institutions). Coffee consumed at home is purchased primarily at a grocery store/supermarket – 79%, with 7% being purchased at the gourmet/specialty coffee shops. Daily coffee consumption among adults varies across Canada, from a high of 70% in Quebec to a low of 53% in the Atlantic region, with approximately 60% in Ontario, 67% in the Prairies and 61% in B.C.

Nowadays, mainstream consumers are looking to the online marketplace for traditional offline products including consumables. Growth in online sales has been aggressive to date: in 1999, with 39% of Canadian households online and only 9% shopping via the Internet, while in 2007, more than two thirds were online and 32% shopping via Internet. Consumers in the 25 to 34 age bracket shopped online the most, with 51% reporting placing online orders. At the same time percentage of households shopping online does not significantly vary from region to region in Canada.

Therefore the target market for Starbuck’s internet sales should be households across the country with focus on urban population, which purchase coffee for consumption at home, aged over 25 and under 40, mostly with higher education and income level from average to higher.

Marketing mix

Products

Product range for online retail should include all major Starbuck’s coffee blends, both in beans and in powder. In addition online sales may include syrups, cutlery (i.e. branded cups, thermoses, etc), brewing machines and Starbuck’s cups.

Price

Pricing should be in line with existing mail order pricing model with certain discount as most of the customers expect online prices to be lower. Also online sales pricing may provide for cumulative discounts for online purchases.

Distribution channels

Major distribution channel should be a single virtual store. In addition distribution may be performed via partner online stores which would redirect orders to Starbucks.

Promotion

Promotion should include steps to inform buyers regarding possibility of online ordering by means of POS materials in Starbucks coffee shops and advertizing in the Internet. As the success of Starbucks traditional marketing heavily relied on “word of mouth”, it should be also translated into virtual space primarily by means of social networks, which are a big success in recent years.