The Starbucks mobile app and Apple Pay have had an amazing amount of influence on both the consumer conversation and general attitudes about mobile payments. This is all the more impressive when you realize that Apple Pay today represents barely 0.05% of all in-store retail transactions.
Nonetheless, the perception persists that mobile payment acceptance is widespread, as illustrated on Thursday (Oct. 29) during a Starbucks investor call.
During the call, Andrew Charles, a vice president at Cowen who had spent seven years previously as an analyst with Bank of America Merrill Lynch, posed this question: "With Mobile Order & Pay and delivery coming soon and the marketing opportunities these have, do you view straight-up mobile payment as something that will ultimately become obsolete or will it still have its place given the robust customer data you receive from it as well as the convenience?"
First off, Adam Brotman, Starbucks' executive vice president and chief digital officer, quickly and properly dismissed the question, saying, "No, mobile payment is not going to become obsolete." But the idea that it was even asked by a senior Wall Street analyst nicely illustrates how ingrained this "mobile payment is becoming ubiquitous" illusion has become.
To be fair, the questioner did say "ultimately," and all technologies will ultimately become obsolete. But mobile payments remain fledgling, not doddering. Remember that Apple Pay just had its one-year anniversary last month.
Let's set aside any imminent suggestions of mobile payment obsolescence and look at what else Starbucks had to say. It offered some truly interesting peeks into its version of buy-online-pay-in-store, where caffeinated consumers can order its Venti Clover Willow Blend beverages online and have them ready when they drive to the store.
From CEO Howard Shultz: "Mobile payment now accounts for 21 percent of all transactions in our U.S. company-owned stores and, although we only completed the rollout of Mobile Order & Pay across our system 7,500 U.S. company-owned store portfolio in September, we were already operating at a run rate of over five million transactions per month." COO Kevin Johnson added that Starbucks active mobile users in the U.S. and Canada have been growing 32%, year-over-year.
It was Brotman, however, who went into the most explicit details by offering some specific store examples for the day before the call. "Yesterday, World Financial Center in New York City did 150 mobile orders for over 10 percent of their overall transactions. Duke Energy Center in Charlotte, North Carolina has been doing incredible with Mobile Order & Pay. They did over 234 mobile orders yesterday for 20 percent of their transaction. Cleveland Clinic in a busy hospital where the convenience of when you're on break and you don't have a lot of time and you want to just get your mobile order and get out, incremental occasions being driven there 269 mobile orders for 11 percent of their transactions. So these are in on our busiest tier. It gives you an example of how pleased our customers and stores are with Mobile Order & Pay."
I do raise an eyebrow at the stores selected. New York City and Charlotte are two of the more tech-friendly cities in the U.S. I will go out on a limb and predict that Mobile Order & Pay is also doing well at Starbucks in San Francisco, Seattle, Austin and Boston. I would prefer some examples from regions where residents are less tech-comfy. Cleveland is a little better in how representative its population is, but a top medical facility such as the Cleveland Clinic probably skews things a bit.
Brotman makes the legitimate point that Starbucks can expect sharply increased mobile activity. First, as consumers grow more comfortable, it's reasonable that the same service will see increased usage. Second, though, it won't be the same service. Beyond technical enhancements — "we're constantly improving the estimated pick-up time algorithm" — SBUX is preparing to enhance the features in "the first half" of 2016, including suggested selling and suggested pairing.
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