Starbucks Mobile Order & Pay Success

by Raymond Pucci 0

“It’s so crowded that nobody goes there anymore.”–Yogi Berra. There were no Starbucks cafes around when the inimitable New York Yankees catcher plied his trade on the baseball diamond. But his words may ring true about the ubiquitous coffee house today. According to the following article, Starbucks’ Mobile Order & Pay feature on its mobile app may have become too successful, driving some customers to turn away because of the lines.

The mobile technology pioneered by Starbucks is making for business problems. It is a variation of the law of unintended consequences: a company pushes a new technology and the successful it becomes, the bigger the problem it creates. In other words, faster, better and more convenient turns out to be none of the above.

It’s all about the mobile world. You may have noticed – if you go to Starbucks– that an increasing number of customers have used mobile phones to order ahead. They walk in and – voila! – their latte or whatever is waiting.

That is, if there aren’t a mob of other mobile orders for the baristas to sort through. And here’s the thing – Starbucks introduced the technology to make service more seamless, to make pick-up more convenient. But a barrage of orders can back up, leaving walk-in customers to pool up at the counter or – worse, from the business perspective – walk away without waiting for their order. As Business Insider put it, “Starbucks’ digital ordering platform has been one of the company’s crown jewels.”

Mobile orders accounted for 7 percent of the total last quarter – more than twice the share of a year ago. More than a quarter of U.S. customers pay with a mobile device.

You’d think that something that speeded up customer service, that greased the skids for delivery of the product, should be a real bonus for a business. And on one hand, Starbucks now has 1,200 stores where 20 percent of the sales volume is coming from mobile – twice what it was a month ago.

Starbucks developed a new sales channel and the results have exceeded expectations. Mobile order and pay has turned out to be very successful for them. Not surprisingly, this is largely due to their highly integrated and engaging mobile app that continues to be best-in-breed. Customers love mobile ordering due to the time savings and Starbucks enjoys the additional revenue stream and staff productivity enhancement. But some stores, especially in busy downtown locations, are now becoming overwhelmed with mobile orders. Starbucks is looking to expand staff as well as to alter the in-store pick-up flow for both point-of-sale and mobile orders. Most Starbucks have limited space so allocating more room for order pick-up will be a challenge—certainly a problem that most quick service restaurants would love to have.

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

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