Starbucks To Jolt Its Mobile Order and Pay Access

by Raymond Pucci 0

Pos terminal confirms the payment by smartphone. Vector illustration in flat design on green background. nfc payments concept

Mobile order and pay transactions continue on a steady growth path at Starbucks. The Seattle barista said that starting in March, it will open its mobile order and pay feature to any customer, not just those that belong to its loyalty program, as the following article reports.

Starbucks, the coffee chain with more than 28,000 locations worldwide, said its mobile order and pay service grew to 11% of transactions in U.S. company-operated stories in Q1 2018 from 10% in the prior quarter. The Starbucks Rewards loyalty program helped to drive mobile growth with an 11% membership gain to 14.2 million from the prior year. Member spending made up 37% of U.S. sales.

The company, which now has the ability to offer mobile order and pay to customers who don’t belong to its loyalty program, plans to ramp up the service to all customers in March, company president and CEO Kevin Johnson said in a conference call with investors. The growing popularity of mobile payment is leading the company to test cashless stores in the U.S.

Starbucks has been an early adopter of technologies like mobile payments and its customers have embraced these options, as evidenced by the fact that 11% of orders now come from mobile. The news that all non-loyalty customers will soon be able to take advantage of mobile ordering suggests this number will continue to grow. Overall, Starbucks’ quarterly sales disappointed, with just 2% growth posted in the U.S.

More broadly, mobile payments are still in a nascent stage in the U.S. despite the pervasiveness of smartphones, suggesting something like blockchain-based payments could be further off. Online payments startup Stripe recently ended support for bitcoin because of challenges with completing transactions.

Starbucks remains the leader among U.S. retailers for mobile order and pay, so it’s no surprise that they are opening up the popular feature to customers that do not belong to its loyalty program. Its overall sales growth in the U.S. has been sluggish of late, so why not attract new business by opening up access to mobile ordering? The coffee cafe space has become very crowded with competitors, so Starbucks is looking to gives its sales a caffeine jolt.

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

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