With Starbucks casting a large shadow over its competitors in the mobile commerce space, many independent coffee shops are discovering the revenue potential of teaming up with third-party subscription application Cups, which recently expanded to the Bay Area.

Cups, which offers monthly subscriptions and prepaid plans for coffee consumption at participating independent chains, rolled out its app to Bay Area residents last week, enabling consumers to test out the service by receiving unlimited free coffee from 40 shops for a limited time. As smaller chains ramp up to retain their existing customers and target new mobile-savvy users, joining forces with a third-party coffee subscription app is a smart move.

“The Cups app prepaid plan options certainly have the potential to be disruptive in the crowded coffee chain space on mobile, locking consumers as loyalty customers in the coffee shops that partner with the app,” said Marci Troutman, CEO of Siteminis. “Dedicated coffee drinkers on average consume two to four cups of coffee daily, making the prepaid option quite a bargain for them and allowing the collaboration of independent coffee houses to compete with the larger chains.”

Catering to coffee lovers
Cups, currently available in New York and Philadelphia, expanded its mobile offerings to reach consumers in San Francisco and the East Bay last week. The app offered a strong call-to-action to heat up the number of downloads made in those areas by offering first-time users unlimited coffee from 40 coffee shops over a three-day period.

Cups does not partner with coffee giants such as Dunkin’ Donuts and Starbucks, both of which have seen significant success with their mobile ordering rollouts. Instead, the company seeks to level the playing field for smaller coffeehouses by bringing them together in the hopes of creating a new type of chain.

Several of its partner shops include Flywheel Coffee Roasters in the Haight, and three Artis locations.

The app allows consumers to sign up for prepaid plans and monthly subscriptions that can be tailored to best fit their coffee consumption. For example, users can pay $90 per month to receive unlimited drip coffee, tea and iced coffee from any of Cups’ participating shops.

Caffeine enthusiasts with slightly more high-end taste can select the $120 per month plan, which offers unlimited access to all types of beverages, including fancier brewed drinks.

Individuals with more basic needs may prefer the less expensive options. They include five or 15-cup plans.

After consumers pay for an in-app plan, they may order beverages directly from their smartphones and stop by their favorite coffee shop to retrieve them.

“Having a prepaid and ‘all you can drink’ coffee plan on your mobile device is a brilliant idea,” said Joe Rubin, co-founder and director of corporate development at Crowded.com. “Anybody who is a regular at Starbucks downloads its app.

“Why should all of the small independent coffee shops be left out? Every small coffee shop in the city should sign up for Cups. Even if it makes them a few extra hundred dollars per month, that means a lot to us mall establishments’ bottom line.”

Swirling up mobile ordering
Mobile order and pay options are paramount features for any coffee shop to implement into its existing digital offerings. The big players in this sector – Starbucks and Dunkin’ Donuts – have experienced unmatched success with their own branded apps.

Starbucks’ Mobile Order & Pay will make its debut in China and Japan later this year as the app heads towards driving 50 percent of the chain’s purchases within the next few years (see story).

Meanwhile, Dunkin’ Donuts prepared itself for a surge in rewards membership sign-ups last month, following the expansion of its mobile ordering pilot to select locations in Massachusetts and Rhode Island (see story).

However, for smaller and more regional coffee chains, teaming up with a third-party platform such as Cups is likely the best move. The app will enable these shops to reach additional consumers and potentially persuade loyal customers to sign up for a monthly subscription.

“As the Cups prepaid app gains traction in additional markets, it would make sense that more independent coffee shops would request to team up with it in order to reach more of the mobile-savvy customers,” Siteminis’ Ms. Troutman said. “The independent coffee shops that are in the already available markets should definitely be keeping an eye on this app to gauge the interest level of consumers in order to not miss this growth opportunity.

“The sense of community collaboration makes this app even more interesting.”