Starbucks has been fueling your caffeine habit for years.
Now, the coffee giant is having unusual success brewing a new kind of customer ritual.
The company said this week that, on average, customers pay for a purchase using a smartphone 7 million times per week, with mobile payments now accounting for roughly 16 percent of total transactions. With so many payments coming from smartphones, it is clear that Starbucks has managed a feat that perhaps none of its brick-and-mortar store counterparts have: They’ve gotten shoppers accustomed to regularly engaging with them on a mobile device.
Even as mobile Web usage has surged, most retailers have so far struggled to get consumers to make purchases from their phones. During the holiday season, for example, record numbers of shoppers browsed on their phones, but very few actually used their phones to close the deal.
Critical to the success of Starbucks's mobile payment platform is its integration with the My Starbucks Rewards program, which allows shoppers to earn special discounts and freebies. The loyalty program added nearly 900,000 new members in December alone, bringing its total membership to more than 9 million people. In a conference call with investors on Thursday, chief executive Howard Schultz called the program one of Starbucks's most important business drivers, saying, "new members contribute not only short-term increases in revenue and profit, but also long-term loyalty for years to come."
Starbucks has bigger ambitions for mobile shopping in 2015. This year, customers will be able to place orders through their mobile app, a feature that the company believes will cut wait times at the counter.
Further evidence of the company's commitment to Web innovation came Thursday, when it announced that Kevin Johnson would become Starbucks president and chief operating officer. A veteran of Microsoft and Juniper Networks, the appointment appears squarely aimed at helping Starbucks transition into the digital era.
Some of the benefits to Starbucks's mobile transformation are obvious: It generates loyalty among its customers. But there are plenty of other possible payoffs. Starbucks is also gathering a rich trove of data about its most loyal customers, something it can eventually leverage to shape its marketing tactics, promotions and even store locations.
It should be noted that it's likely easier for Starbucks to cultivate a base of regular app users and large loyalty program membership, and that's because it's a business that is often deeply entwined with its customers' daily routine: Maybe it's their first stop in the morning before they drop the kids off at school, or maybe it's the place they go at 3:00 p.m. when they need a pick-me-up at the office. Much like a grocery store, customers go there often and can clearly see the upside of joining the rewards program.
A retailer that gets less frequent visits, such as an electronics or furniture store, is going to have a more difficult time luring customers into its smartphone and loyalty program ecosystem, simply because it has so many fewer chances to do so.
Starbucks's most recent quarter was one of its strongest on record. Robust holiday-season sales helped propel the company to a 13 percent increase in operating profit and global sales rose 5 percent at restaurants open more than a year. The company calculated that one in seven Americans received a Starbucks gift card during the quarter.