Starbucks Corp. is reaping the benefits of increased participation in its prepaid loyalty card program and its ongoing expansion into mobile payments in the U.S., the company said July 29 when announcing results for its fiscal third quarter.
The Seattle-based company posted record sales overall for its prepaid loyalty card program for the quarter ended July 3, with customers activating nearly 150,000 loyalty cards daily, the company said.
Funds loaded into Starbucks loyalty card accounts during the quarter rose 38% compared with a year earlier, Howard Schultz, Starbucks chairman and CEO, told analysts during a conference call to discuss earnings. The company did not break out comparison figures.
Mobile payments comprise a growing share of loyalty card transactions, Schultz suggested, but he did not disclose total numbers.
“There are now more than 1 million mobile devices with more than $50 million loaded for use specifically at Starbucks, and reloads are tracking well ahead of plan,” Schultz said, noting mobile payment “drives store traffic and also increases the speed of service.”
Starbucks executives on March 29 told analysts at a Las Vegas industry conference JPMorgan Chase & Co.’s J.P. Morgan unit sponsored that Starbucks customers loaded $1.7 billion into the company’s loyalty card accounts in fiscal 2010 and that loyalty cards account for one in five transactions.
During the quarter, Starbucks expanded to 8,000 the number of U.S. locations where it offers barcode-based mobile-payment acceptance through smartphones, Schultz said. That includes enabling mobile payments inside several hundred Safeway stores, and the company plans to complete the rollout of mobile-payment acceptance to 1,000 Safeway stores by yearend, he said.
“Starbucks continues to offer one of the largest mobile-payment retailer networks in the U.S., and our network is growing,” Schultz said. He did not specify further mobile-payment expansion plans.
Schultz also noted the positive effect of the company’s third-quarter introduction of a Starbucks mobile payment app for Google Inc. Android phones (
“I’m pleased to report that our innovation pipeline is robust, and we are seeing significant benefits from the investments we’re making in mobile payment technology,” Schultz told analysts.
Starbucks posted record quarterly net income of $279.1 million, up 34.2% from $207.9 million a year earlier. Revenues were $2.9 billion, up 11.5% from $2.6 billion.
Although Starbucks’ mobile-payment service is a closed-loop system, its success proves that consumers have a strong interest in technologies that improve convenience, Megan Bramlette, a director at Auriemma Consulting Group, tells PaymentsSource.
“Mobile is a big deal for Starbucks, and they’re doing a good job at delivering tools that make it easier for consumers to control their payment information and pay quickly,” she says.
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