Mobile Order and Pay Competition: Starbucks vs. McDonalds

by Raymond Pucci 0

mobile ordering coffee

While burger eaters and latte drinkers may be two different consumer market segments, it can be instructive to observe how two major Quick Service Restaurants (QSRs)—McDonalds and Starbucks—are bringing their sizable resources to mobile order and pay applications. As the following article reports, McDonald’s may have been late to the party, but they are coming on strong and now giving in-a-hurry customers a versatile mobile ordering app.

As foot traffic falls flat, chains are turning to mobile ordering in an attempt to boost sales.

The number of orders being placed via mobile apps skyrocketed by 50% in US restaurants in 2017, according to data from the NPD Group. And, Business Insider Intelligence predicts that by 2020, mobile order-ahead will account for 10.7% of all quick-service restaurant (QSR) sales.

So far, Starbucks has led the way in mobile order and pay. Mobile and other digital payments make up nearly a third of all of the coffee chain’s sales, and they account for even more of the company’s sales growth.

“Almost all of our same-store sales growth is from those customers that we have digital relationships with and those that are in our Starbucks Rewards program,” Starbucks CFO Scott Maw said at a JPMorgan forum in March.

Seeing Starbucks’ success, other chains are trying to cash in on mobile ordering. In 2017, McDonald’s announced plans to roll out mobile ordering at all US locations.

However, while mobile orders are intended to make ordering more convenient for customers, they can also create new issues. Starbucks has faced problems with overcrowding and bottlenecks in the past, though these seem to have been resolved with some behind-the-scenes changes.

With McDonald’s building out its more gourmet coffee offerings and Starbucks working to improve its food selection, the two biggest chains in the US by sales are competing more and more. So, we decided to see how their mobile-ordering apps measure up.

Almost all QSRs have discovered the merits of mobile order and pay as a growing sales channel. Many customers now expect their favorite shop to offer it, so there is heavy competition among the QSRs to offer a mobile order app that is engaging and feature-rich. The key to success is speed and convenience among the leading contenders, as well as to integrate marketing offers and loyalty points to generate frequent customer return visits. Some QSRs are experiencing flat sales, and are looking for mobile app orders to boost overall store traffic. Expect to see mobile order and pay as a differentiating strategy to attract more customers.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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