Starbucks CEO Howard Schultz recently claimed that mobile payments at the popular coffee chain are growing almost 50% annually, and that 90% of all mobile payments in 2013 were made at Starbucks. Schultz further revealed that the success in the mobile payments market has Starbucks planning to begin offering coffee delivery that customers can order by phone, effectively transforming the brick-and-mortar company into an e-commerce business.
While Schultz's data source was not disclosed, what's clear is that mobile payments are on the rise nationwide and Starbucks customers are among most frequent early adapters of this increasingly popular payment option. In Mobile and Alternative Payments in the U.S., 4th Edition, a new report by market research publisher Packaged Facts, mobile payments at the point of sale is projected to reach $35 billion this year. Looking ahead Packaged Facts anticipates robust growth in 2016 and 2017 as Google, Apple, PayPal, Square, and others convince a growing legion of consumers to abandon antiquated physical wallets in favor of their smartphone-based equivalents.
According to Mobile and Alternative Payments in the U.S., 4th Edition, the success and popularity of Starbucks' mobile payment program can be attributed to several factors, including the growing number of consumers using smartphones, acceptance of the mobile app at many locations, customers' perception of an enhanced retail experience, and Starbucks desire to serve as many customers as quickly as it can. Ultimately, mobile payment functionality has been so wildly successful for Starbucks because it seamlessly integrates mobile payments with its already successful mobile loyalty program and in-store digital experiences.
Aside from helping Starbucks operate more efficiently at the point of sale, the mobile payment and loyalty platform helps Starbucks reach new customers, engage and reward current customers, create awareness to new products, drive incremental transactions, and explore new revenue streams in music and digital publishing. The company's mobile strategy builds off of its stored value card platform, which differentiates the company from its competitors, notes Packaged Facts research director David Sprinkle.