Starbucks Has Bigger Plans in Mobile Payments Than Most People Realize
A decade after the idea was first sketched on the proverbial drawing board, Starbucks is poised to finally let its customers order their coffees from their phones. And the company’s plans for building on its wildly successful mobile app don’t stop there.
The Seattle-based coffee giant, which said in March that more than 14 percent of purchases in its U.S. stores are paid for through its app, will allow customers in one undisclosed geographic test market to start placing pickup orders from the Starbucks app later this year, according to the company’s Chief Digital Officer Adam Brotman. This should not be confused as an experiment, Brotman made clear. Starbucks is determined to eventually roll out the technology nationwide, no matter how long it takes.
“We will do this and we will get it right,” Brotman told Re/code in an interview following his onstage appearance on Wednesday morning at Fortune magazine’s technology conference in Aspen, Colorado.
The initiative comes at a time when Americans are increasingly turning to apps on their phones to order products and services to be picked up or brought to them. Cab-hailing services such as Uber and Lyft have taken major cities by storm, while food chains like Chipotle enjoy high usage for their order-ahead feature. Then there are apps from companies such as GrubHub, Tapingo and Square that allow people to order food and beverages from a variety of different smaller food and drink establishments. Purchases made in Starbucks stores with credit or debit cards run through Square’s payments platform, but transactions in Starbucks’ app do not.
With the momentum building for mobile ordering, Starbucks does not want to watch from the sidelines any longer. Customers have been requesting the functionality for the past few years, but only recently did Starbucks feel that its technology and in-store operations were strong enough to enter the fray, Brotman said. If executed well, Starbucks believes the feature will make current customers even more loyal to the coffee chain, giving them an option to avoid long waits during busier hours.
The move certainly comes with risks. One sour experience — an order isn’t ready or has been sitting too long — is enough to leave a persistent bad taste in the mouth of a customer.
The beverage Starbucks is best known for also adds an additional layer of complexity. Have coffee sit too long, and a customer who ordered ahead will arrive to a cold cup of joe. Starbucks, of course, knows this, and has been testing the order-ahead process inside a model store in its Seattle headquarters, Brotman said. The company is also conducting tests to determine how long it takes for different brews to cool.
“We’re trying to get things down to a science,” he said. Still, he acknowledged that new problems will arise when the feature rolls out to the real world, so the company is spending as much time creating plans for responding to problems as it is trying to craft a perfect process.
The team behind the initiative consists of employees from across various Starbucks divisions — from store operations to IT — and meets with Brotman once a week.
“It’s the most cross-functional team I’ve ever worked on and the most important project I’ve ever worked on,” Brotman said.
Simultaneously, Starbucks is in talks with potential partners to allow its customers to use the Starbucks app as a payment instrument in other stores, Brotman said. The talks also include discussions about potentially extending Starbucks’ customer loyalty program to other companies, too. Such a move could vault Starbucks into competition as a so-called digital wallet: An app that aims to let shoppers pay for goods with their phone at a wide range of disparate brick-and-mortar stores. Brotman declined to name the companies Starbucks is having discussions with.
While some might question whether it’s smart for Starbucks to stray from its core competency, Brotman says the company believes that extending the Starbucks payment and loyalty program beyond its own coffee shops will likely increase usage of the app as well as affinity for the Starbucks brand.
“We want to get mobile ordering right first, but you could be hearing more about us in the mobile wallet or universal loyalty space sooner than later,” Brotman said.