Getting your grande latte without the grande lines
Mobile ordering and payment app brews success for Starbucks.
In a world that is rapidly moving away from brick and mortar stores and transitioning to online shopping, how does a coffee company use technology to better engage with and retain its customers? Picture this – you just took a red-eye in from SF to JFK, and are in the cab on your way to an early morning meeting. All you need is a coffee, and with a few clicks on your phone you’re able to locate the nearest Starbucks, order and pay for your favorite latte, and it will be there waiting for you when you arrive.
The Starbucks app is said to be one of the most widely used mobile payment apps in the U.S. What can you do on the app? Locate your nearest Starbucks. Pay using state of the art barcode scanning in store, or better yet, pay via the app before you even get there. Pre-order your favorite drink and have it waiting there for you. Collect rewards to use for free drinks, food, and more. Send Starbucks Card eGifts to friends via the app. It sounds like the question is more like “what can’t you do on the app?”
What does Starbucks get out of the app? Although Starbucks hasn’t seen a significant hike in profitability due purely to the app itself, the number of orders placed via the app is astounding – about 16% of orders are placed via the app, and that number has been forecasted to grow at about 50% annually. Many companies struggle to gain user adoption of mobile payment apps. Why has Starbucks succeeded?
To start off, coffee is personal. It’s habit. It’s something that many people drink every day. Starbucks found away to engage with their clients to make the experience feel even a bit more personal. Starbucks Rewards encourages regular customers to continue their loyalty, and perhaps even convince the not as regular customers to come more.
Starbucks uses their app to make it easier for customers who are looking for ease and convenience when making their daily Starbucks run. Customers who may have otherwise been too busy (or can’t be bothered for that matter) to wait in line at the store and go through the hassle of paying can now seamlessly complete their transaction in only a few clicks.
Starbucks also found a way to make coffee more social amongst friends with their eGift capability. Want to thank a friend for watching your dog? Send them a gift card via the Starbucks app.
What’s next? It has said that Starbucks’ next move with the app is to move into the delivery space. What impact could this have on delivery services (Postmates, and potentially Uber)? It’s been said that leading mobile payment services have approached Starbucks for partnerships because of the success of the app. Starbucks has a proven track record of being innovative – and I’m not just talking about their drink recipes. I believe Starbucks will continue to push the boundaries of innovation both within and outside of their industry.
Very interesting post – with still “only” 16% of orders placed via the app, I imagine there are significant efficiency gains during rush hours to be achieved by continuing to push adoption of this app for ordering coffee.
I wonder — does trying to incorporate digital into Starbucks’ existing operating system risk alienating current ‘traditional’ customers? Most Starbucks have many 2-3 baristas making drinks at any given time; if I walk into Starbucks 10 minutes before a meeting and see 20 people ahead of me in line, I know to turn around and leave. In a world where 50%+ of consumers are now ordering their drinks on the app, I might choose to stay in line because I only see 5 people ahead of me, when in reality there are still 20 drinks ‘ahead of me’ in the queue. I can guarantee that I will storm out very pissed when my barista is making drinks for other people who aren’t there. So the question for me is: do most people WANT to order their drinks on an app, and is Starbucks willing to lose a big portion of consumers who aren’t?
I’m curious to see the impact of in store operations as the share of online ordering and payment increases. With shorter average time to order and pay, the balance of the process will change and drink preparation will become the clear bottleneck. Unless the current model changes customers may end up waiting awkwardly at the end of the line instead. What will Starbucks do then? Buy more espresso machines and shift staff there? Automate some of the drink preparation process? Build an inventory of skinny caramel lattes to go? Very interesting indeed!
Building on Vlad’s point, I’m also curious on how far apart from Starbucks initial value proposition is the delivery concept. It definitely sounds super practical and desirable but wouldn’t this jeopardize the whole coffee experience on which the company was built? Even more, once you are already in your office alternatives grow importantly. Automatic coffee machines like Keurig, Nespresso or Dolce Gusto provide you with a similar coffe at a 1/6 the cost. How could Starbucks compete against this?
Nice writeup. I agree with the changing world you painted, I just wonder about the “personal” aspect vs. the convenience. I would bet that for every person looking for a “personal” experience, they are hundreds of others that just want their coffee fast and easy. Could Starbucks lose the barista altogether and just have automated machines at more locals that create your remote order? This would retain the customized experience (i.e. soy mocha double skim latté), which reducing costs and increasing speed.
It’s interesting that some people bring up automatic coffee machines. I recently came across an automatic Starbucks machine in a train station in Europe — something that I haven’t seen here, though it may certainly exist. Basically, it was a machine within a Relay store where you could buy a selection of Starbucks drinks (e.g. cappuccinos, lattes, chai lattes, etc) that were prepared on the spot by the machine and cost a bit less than they would at a regular “staffed” Starbucks. The taste of my drink was the same as at a normal Starbucks. Since these already exist, I wonder whether Starbucks will integrate them either within their supply chain as the bottleneck shifts, and/or to compete outside of the traditional Starbucks experience with other automatic coffee makers. I’d be curious to know how attached Starbucks customers are to the ambiance and coffee shop experience that made them popular in the first place (thought-out design, etc), or whether they just want their daily standard coffee and wouldn’t mind a more automated solution if it were more efficient.
Very interesting post – the value of “skipping the line” in the Starbucks case makes me think of the tremendous value that can be created and captured in retail (or other) experiences in general by eliminating or minimizing lines – value for the customer, whose experience greatly improves, and for the retailer’s – or other entity’s – operations, who can have resources and physical space freed up from lines. An example of a place it would be great to see the type of thing Starbucks has done, for example, would be in clothing retailers that typically have heavy foot traffic, and both long dressing room and checkout lines. It will be interesting how other industries seek to create value creation/capture models around the elimination of lines.