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Starting July 1, Starbucks (NASDAQ:SBUX) will be offering free Wi-Fi access to its US customers which will be followed later in the year by the launch of a dedicated digital content portal. The portal, to be developed in partnership with Yahoo (NASDAQ:YHOO), will provide customized news and entertainment content for Starbucks’ customers.

These initiatives from Starbucks are designed to increase customer traffic and spend at Starbucks locations by providing extra value to consumers. It also helps Starbucks to better compete with rivals like McDonald’s (NYSE:MCD) and local coffee shops that already provide free Wi-Fi access.

Revival in Customer Traffic Important for Starbucks

Daily customer traffic at Starbucks stores has dipped in recent years due to a combination of Starbucks’ over expansion (leading to cannibalization) and rising competition in premium coffees. The closure of more than 900 loss making Starbucks stores over the last two years helped the company to curb further declines in its daily per store customer traffic.

The recessionary environment led consumers to lower priced coffee makers (like McDonald’s) and as the economy rebounds, Starbucks is introducing new initiatives to lure back former customers. With McDonald’s already providing free Wi-Fi at its more than 11,500 US outlets, the introduction of free Wi-Fi at Starbucks locations was a necessary move.

Opportunity to Increase Spend on Beverages and Food

Free Wi-Fi will also encourage visitors to linger longer at Starbucks stores which could have a positive impact on the average customer spend on food and beverages. Although only a fraction of Starbucks customers stay in the store after their purchase, a higher spend by these customers can help overall customer spend improve.

Disclosure: No positions

Source: Starbucks Lures Back Old Customers With Free Wi-Fi, WSJ and iTunes Access