Starbucks—not exactly the first brand that springs to mind when you think “tech company”—may well have the best mobile retail app in existence.
Company executives certainly think so.
“We believe that we are building an unassailable position that will only strengthen and become more relevant as today’s increasingly mobile-first customer economy evolves,” Starbucks chairman and CEO Howard Schultz told analysts last week, after dropping yet another solid earnings report. (Starbucks shares are up more than 50 percent in 2015.)
‘We believe that we are building an unassailable position.’ Howard Schultz, Starbucks chairman and CEO
Schultz went on to detail the different ways in which Starbucks is killing it with its digital strategy, and it’s hard to disagree with him. He pointed to Starbucks’ final rollout of its mobile order and pay feature, which lets users order a latte via app and pay even before arriving at any of its 7,500 US stores. According to Schultz, Starbucks is already handling more than 5 million mobile orders per month—and that figure is growing by the hour. The coffee company recently sealed digital deals with The New York Times, Spotify, and Lyft. Schultz boasted that Starbucks’ loyalty program now has 20 million members. And he described the coffee company’s latest on-demand initiatives: Two weeks ago, the company began delivery in the Empire State Building, and it’s launching delivery in Seattle with Postmates later this quarter.
In all sorts of ways, Starbucks is showing that it gets how to integrate the way its business works with the ways consumers want to use their personal tech. Starbucks’ active mobile users, execs revealed, have grown by 32 percent year over year. Starbucks had already reported 9 million customers paying at Starbucks counters with their phones every week, out of 45 million total. In October, mobile payments reached a new milestone, accounting for 21 percent of all Starbucks transactions in the US—momentum that could make even Apple envious.
An Early Player
It’s easy to forget, but Starbucks has long been a strong player on the digital front. As early as 2002, Starbucks launched Wi-Fi in stores. By 2007, it began providing free access to iTunes Music in partnership with Apple. In 2008, it launched Pick of the Week, the program that let you get free iTunes music downloads using cards you could pick up in its coffee shops.
Starbucks’ mobile app is the next step in that chain of digital successes. Think of the last time you used a mobile app to check out at a brick-and-mortar store. Personally, I can only come up with Starbucks (and maybe the Apple retail store app). And that’s not for lack of brick-and-mortar apps out there: Wendy’s, Chipotle, and even Wal-Mart all have ’em. But for many retail apps, customer awareness is low. Even when customers do know about store apps, they may not see much added value in using them. That’s where Starbucks, with its integrated loyalty program, really shines.
“Starbucks’ technology focus spans multiple areas including payments, loyalty and rewards, and content,” Jack Kent, director of mobile at research firm IHS, tells WIRED. “The main aim for all of these is to drive sales.”
The Starbucks and Apple Connection
It’s even more telling when Apple, the most profitable company in the entire world, and a winner in its own right when it comes to developing a smartly designed and cohesive retail store app, wants to ally itself with your company.
Apple appears to be floundering a bit since the launch of its much-hyped mobile payments feature last year. Apple Pay is supposed to be the company’s ambitious move to own digital payments by providing a dead-simple and easy-to-use mobile service that eliminates the credit card—and Apple CEO Tim Cook bragged that users activated over 1 million credit cards on the service in its first 72 hours. By the end of September, 14 percent of households with credit cards signed up for the payment service, according to Reuters, citing research from Phoenix Marketing International.
But, the same research shows that growth has slowed. Apple hasn’t talked about the number of Apple Pay users in a while—during the company’s recent earnings call, it merely said it was still seeing “double digit monthly growth in Apple Pay transactions.”
As it turns out, our phones are the other socially acceptable addiction these days. And Starbucks has figured out how to get both to work in its favor.
Where to turn to jumpstart Apple Pay? What about the company that’s already found mobile payments success? During the same earnings call, Apple said it would roll out Apple Pay support to all U.S. Starbucks stores in 2016.
So, yeah, when it comes to digital strategy and partnering with the right players, Starbucks is still winning. And the company’s not done yet, either. Starbucks global chief strategy officer Matthew Ryan says to expect more deals to come in addition to the company’s freshly minted partnerships with The Times, Spotify, and Lyft.
Basically, the idea is by integrating its loyalty program with other kinds of businesses, Starbucks loyalty members can earn “stars” for free coffee in all kinds of ways when they use their phones, not just when they use the Starbucks app.
“We are in the process of building capability to offer stars everywhere,” Ryan says. “That is, the opportunity for customers to essentially earn stars at a lot of different places and take them back to Starbucks.”
It’s one more way Starbucks hopes to get coffee drinkers in the door. And yes, the craving for caffeine helps. As it turns out, our phones are the other socially acceptable addiction these days. And Starbucks has figured out how to get both to work in its favor.