The Starbucks mobile app is now used for 8 million transactions a week, or 19% of the company's U.S. sales, but the biggest development is not in the numbers but the nature of the app's users.
The company has accepted mobile payments at the counter since 2009, and its new Mobile Order and Pay feature provides patrons an alternative to the typical process of waiting in line, paying and then waiting again for a barista to call out their names. To the deaf and the extremely busy, this new process of ordering ahead from the app was especially meaningful.
Deaf customers "are now able to easily order and receive their customized beverage just the way they want," said Kevin Johnson, Starbucks' president and chief operating officer, during an April 23 conference call to discuss the Seattle company's earnings.
The mobile ordering feature also appeals to students, who can order and pick up a beverage as they rush between classes, as well as parents who have little time to stop for coffee as they rush their kids from place to place.
"This is not just leveraging the strong base that we already have in our mobile commerce platform," said Adam Brotman, the company's chief digital officer.
Starbucks' success in payments so far underscores how nonbanks can outdo banks at their own game and should be watched closely by banking industry participants. The coffee chain is currently testing its mobile ordering service in 600 stores in the Pacific Northwest and plans to expand the feature nationwide over the course of the year. It is also planning to bring the feature to its Android app, as well as to stores in Canada and the U.K., Brotman said.
"Mobile Order and Pay is exceeding every internal goal we've set," Johnson said. "Our experience to date gives us confidence that once fully deployed, Mobile Order and Pay will drive a significant increase in mobile payment transactions in stores across the U.S."
The My Starbucks Reward program and the prepaid Starbucks Card, which are two fundamental elements that drive use of the Starbucks mobile app, are also expanding Starbucks' audience.
The My Starbucks Reward program achieved record growth in Starbucks' fiscal second quarter, which ended March 29. The 1.3 million new My Starbucks Reward members are "more additional members in one quarter than most loyalty programs have in total," said Howard Schultz, Starbucks' chairman and chief executive, during the conference call. In total, the company's reward program now has 10.3 million active members.
Also in the second quarter, Starbucks handled $1.1 billion in loads to its stored-value Starbucks Card, which is used as the funding mechanism for its mobile sales. During the 2014 holiday season, one in seven Americans received a Starbucks card as a holiday gift, the company reported in January.
Starbucks' revenue rose 18% to $4.56 billion, in the second quarter from a year earlier and earnings per share rose 18% to 33 cents. Johnson became a Starbucks executive in March, following five years as a member of the Starbucks board.