Starbucks Finds Success with Mobile Payments

More than 10% of Starbucks U.S. transactions are now made with a mobile device. The Starbucks mobile app processes more than 4.5 million payments a week. Starbucks profits are up 25% and the company’s best fiscal third quarter earnings ever. The coffee chain’s loyalty program, The Starbucks Card, is now a multi-billion dollar part of their business.

No more digging for change or searching for lost gift cards at Starbucks. The retailer’s mobile app offers customers free rewards for using the app to prepay for future coffee purchases by loading a mobile gift card, completing purchases in-store and sending e-gift certificates to others through the app.

Starbucks’ app isn’t only for mobile payments. App users can also download free songs, find stores using a phone’s GPS, keep track of favorite drinks, view store hours and see menus. The app was created to reduce in-store waiting time, resulting in higher average tickets and to integrate their loyalty program on mobile and social media.

Can Starbucks still improve their mobile app? Yes, and they will.

True Mobile Check-out

Despite the success of the mobile app, Starbucks still hasn’t escaped scanning a barcode on a consumer’s phone to accept payment, utilizing a process that resembles Walmart’s “Scan and Go” where a shopper has to scan a QR code at the self service kiosk to complete the purchase.

Starbucks Chief Digital Officer Adam Brotman said, “Mobile devices have become increasingly important part of the customer experience at Starbucks as the fastest and easiest way to pay in our store.” But what if Starbucks takes it a step further and makes it the fastest and easiest way to actually get your coffee and not just a faster way to complete a payment? I walked passed a Starbucks in downtown San Francisco around 8:30 a.m. and saw about 30 people in line, looking miserable, who couldn’t get their fix fast enough and hoped to still make it to work on time. Sure they can pay by phone when they finally reach the register, but how can they decrease their wait time?

Order Ahead

Starbucks has everything in place for a future feature: order ahead. A consumer can customize their drink in every way imaginable on the app, but you can’t actually order that drink from the phone. Wouldn’t it be convenient if customers could order it before they arrived and it’s waiting for them? Ordering ahead works beneficially for restaurants like pizza chains and even the burrito giant Chipotle, and it seems like the perfect addition to the Starbucks mobile app.

UPDATE: Starbucks thought so, too. We look forward to tracking the success of Starbucks’ order ahead feature and how this elevates the demand for mobile order-ahead capabilities for a wide range of merchants.

Mobile Credit Card Payments

The company saw more than 30% year-over-year growth in total dollars spent in-store from My Starbucks Rewards in the U.S. The Starbucks app involves a variety of different payment options, including PayPal and credit cards, but only to reload your Starbucks card. Most consumers would probably like the option to pay for individual transactions with their card directly, but I suspect Starbucks profits too much on unused Starbucks card balances for this feature to appear anytime soon.

All In on Mobile

For years, Starbucks positioned itself in the coffee market as the prime destination of technology lovers, business professionals and students, offering free wifi in its locations before that was cool. They might not have the best coffee you can buy, but the company strived to create an environment that appeals to their target customer base and makes the customer’s life easier when they’re enjoying expensively priced coffee drinks in-store.

Building on this benefit-driven, customer-focused business foundation, Starbucks continues to search for new ways to increase customer convenience and stay current. They began adopting mobile payments in 2009 and continue to introduce new mobile initiatives. Starbucks is installing wireless charging mats for mobile in select locations and planning a nationwide rollout. Also, the coffee chain recently opted for Google wifi over AT&T, starting over the next month, to offer its customers up to 10 times faster network speeds. Starbucks doesn’t plan to stop there. Expect more mobile customer benefits in the near future.

What do all these mobile developments say about Starbucks business strategy? They’re placing a huge importance on mobile going forward and rightfully so. In the U.S., 56% of Americans own a smartphone. Free wifi is now pretty common in coffee shops, probably, in part, due to Starbucks’ success. They’re doing what they do best; proactively anticipating and acting on evolving customer behavior. To entice customers to continue purchasing expensive lattes, Starbucks is on a mission to offer appealing mobile incentives and become well-established with younger generations.

The Starbucks app is a good illustration of how mobile commerce can drive value if a retailer properly integrates it into existing programs and sees it through to widespread adoption.

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