Mobile Accounting for 15% of Starbucks Sales

by Jennifer Kent | Jul. 28, 2014

In its earnings call last week, Starbucks announced it now counts more than 12 million monthly active users of its My Starbucks Rewards app - a solid 20% growth in active users from 10 million just over a year ago (April 2013). The My Starbucks Rewards app is both a loyalty program and a digital wallet that allows users to store value in the app and pay at check-out by displaying a barcode on the smartphone screen. Transactions made via the mobile wallet now account for 15% of all Starbucks sales in the U.S. and Canada, up from 10% last year.

Other companies in the mobile wallet space have not generated Starbucks' level of success. Partially, this is due to Starbucks’ unique and hard-to-duplicate approach. Starbucks benefits from a loyal user base, many of whom make purchases weekly, if not daily; plus, the particular goods involved – coffee and grab-and-go food – require that the purchase experience be quick and convenient. The number of merchants enjoying Starbucks’ level of consumer loyalty and purchase frequency, with the right type of goods to make barcode payment a convenient option, are few. With limited space available for app downloads on users’ smartphones, and the requirement that each pre-paid application be filled separately, it is unlikely that consumers will download a merchant-specific payment application for each of their favorite retailers.

Indeed, most major mobile wallet players – Google, PayPal, Isis – do not replicate Starbucks’ approach. Instead, their wallets accept multiple payment mechanisms and are intended to be used across a vast ecosystem of merchants. But can retailers – not tech companies and mobile operators – follow Starbucks model? Comments in the earnings call indicated Starbucks may be open to partnering with other companies interested in using its technology. This could be a particularly good approach for retailers without the internal expertise or budget to build a mobile loyalty application with wallet functionality – especially given that the three-year-old Starbucks app is user tested and approved.

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