Mobile Commerce

Starbucks’ Massive Mobile App Momentum

Starbucks CEO Howard Schultz has always said that Starbucks is an “undisputed leader in mobile commerce.”

And he uses the mobile stats that he presents each quarter as fodder to support his claim. And the company’s third-quarter earnings call yesterday (July 23) was no exception.

Schultz shared that Starbucks’ mobile transactions now account for 20 percent of all in-store sales — more than 9 million mobile transactions a week — and a 4 percent increase in foot traffic.

“Our mobile commerce platform is literally stronger than ever,” Schultz said, noting that the 20 percent figure was more than double the mobile transaction sales figures seen just two years ago. 

“Our plan all along has been to bring our MSR (My Starbucks Rewards) membership and our digital capabilities to scale, and we are now there,” he added.

Starbuck’s Mobile Order & Pay was also another focus of Schultz’s comments as he said that the service is available at more than 4,000 company-operated stores, with plans to expand across the rest of the U.S. before the 2015 holiday season. Starbucks also has plans soon to introduce the Mobile Order & Pay app to Android customers, as well as in some of its international markets.

“Mobile Order & Pay is fueling both revenue and profit growth in every market in which it has been deployed, with customer adoption starting faster and accelerating with each new phase we roll out,” he said. 

Keeping in theme with how he believes Starbucks set the curve for digital initiatives for brick-and-mortar retailers, Schultz reminded analysts of his comments two years ago when Starbucks began its massive investment in digital initiatives. Investments, he emphasized, that took a different approach than most.

“Two years ago I reported on the seismic shift in consumer behavior that would significantly impact traditional bricks-and-mortar retailers. I was not clairvoyant. Since then, many traditional retailers have responded simply by substantially increasing their digital advertising budgets — significantly driving up their customer acquisition costs and producing little to show for it,” Schultz said. “We, on the other hand, took a very different approach. By further enhancing our already world-class digital technologies through the introduction of capabilities like Mobile Order & Pay — and soon to be delivery — and expanding our loyalty program, we are driving traffic as reflected in the 4 percent growth in traffic seen in Q3.”

Speaking of loyalty, he also gave some big numbers about how its MSR members were keeping up. In Q3, MSR membership hit 10.4 million active members, which was a 10 percent increase from the same quarter a year prior. Gold membership is about 60 percent of that at 6.2 million members, up 32 percent from last year.

Adding more loyalty fuel to the MSR fire, Starbucks has recently rolled out strategic partnerships with three companies to expand the Starbucks reward experience beyond just its four walls: Spotify, The New York Times and Lyft.

With Spotify, Starbucks will offer Starbucks rewards that provide an incentive to use Spotify’s premium service. In turn, Spotify gets more paying members, and Starbucks has the chance to bring more consumers into its stores.

The New York Times will provide free digital curated content to MSR members. Lyft drivers will automatically receive gold membership, and Lyft will also will provide drivers with Starbucks e-gifts rewards.

“We strongly believe that no other bricks-and-mortar retailer has the brand strength, digital and physical assets or connection to consumers to create, build and execute a program anything like this,” Schultz said. “We have identified perspective partners in multiple attractive business verticals, and you may expect to hear about many more carefully curated customized digital partnerships as we roll out this proprietary Starbucks star-centric digital and loyalty ecosystem.”

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