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Starbucks locks in on streamlined app experience to grow mobile revenue

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March 21, 2014

Starbucks' mobile app

With mobile now accounting for 14 percent of Starbucks’ sales in the United States, the company is looking for next-generation application features to keep the brand ahead of the curve.

During Starbucks’ Annual Meeting of Shareholders earlier this week, it was revealed that mobile sales have grown from 10 percent to 14 percent of the company’s total United States revenue since July last year. With the addition of new payment app features and tests, Starbucks hopes to continue to lead the pack of retailers seeing the most success with mobile.

“What we saw this holiday with the Starbucks gift card and mobile [is that] the investments that we’ve made ahead of the growth curve and the investments we’re going to make in the near term are going to put us in a very unique position we believe not only to manage through and negotiate through this seismic change, but come out on the other side as one of the big winners,” said Howard Schultz, CEO of Starbucks, Seattle at the meeting.

Mobile brew

Starbucks brought in $15 billion in revenue during the 2013 financial year with an average transaction of $5. Part of the reason why Starbucks has seen success with mobile is because of these small, consistent sales.

Starbucks also plans to test an order-ahead feature this year that lets consumers place their drink orders before arriving at a store.

The order-ahead feature has been in the works for Starbucks for quite some time, but the fact that the brand now plans to begin testing the feature in select stores indicates that it is now the time to start packing the app with additional features based on the current amount of revenue mobile is generating.

Additionally, the brand is now honing in on improving and speeding up the payment process.

The newest mobile numbers come shortly after Starbucks added two new features to its iPhone app.

Starbucks announced the addition of digital tipping and shake-to-pay to its app last week (see story).

In addition to new mobile tools, Starbucks also plans to sell alcohol products in its stores at night after testing spirits sales in several of its stores.

Starbucks similarly made a big push into grocery and Teavana stores to sell packaged and grocery goods. This strategy was supported by the coffee giant’s loyalty program to reward consumers with points — or stars — for buying Starbucks products (see story).

“The fact that Starbucks continues to see growth in mobile payments, currently 14 percent of their revenue, speaks to their ability to not only attract new mobile customers, but also maintain their mobile user base once converted,” said Nathalie Reinelt, analyst for the retail banking and payments practice at Aite Group, Boston.

Building up mobile momentum
To keep up with the company’s shift towards mobile and digital retail, Starbucks also restructured its executive roles in January, underscoring the company’s focus on blending digital and in-store experiences (see story).

“As with any new feature added to their mobile payment application, Starbucks will continue to build brand loyalty with order-ahead functionality,” Ms. Reinelt said.

“It also has the potential to convert Starbucks customers, who aren’t already paying with their mobile application, into mobile consumers with the incentive to streamline their experience and skip lines altogether — a very relevant feature for the avid Starbucks consumer,” she said.

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York 

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