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Emerging Payments

Starbucks CEO: Mobile Payment Signals ‘Seismic Change’ In Consumer Behavior

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One of the biggest champions of mobile payments so far comes from an unlikely sector–the coffee industry.

Starbucks Corp. CEO Howard Schultz on Jan. 26 told analysts that the emergence of mobile payments is part of a “seismic change” in consumer behavior that played a key role in the Seattle-based coffee marketer’s record revenues for the quarter ended Jan. 1.

Reflecting on the success of Starbucks’ mobile-payment applications for iPhone and Android introduced last year, Schultz deemed it indicative of “the unbelievable way in which mobile payment and mobile commerce is going to change the way in which consumers buy things.”

Starbucks’ efforts in developing a closed-loop mobile-payment platform underscore “an important point: We are the No. 1 company, not in the U.S., but in the world, in terms of mobile payment transactions and dollars,” Schultz said.

Though Starbucks did not break out specific totals for spending through its mobile app, Cliff Burrows, president of Starbucks Coffee U.S., told analysts customers during December loaded $500 million into their Starbucks prepaid card accounts, which encompasses mobile-app users, up 23% compared with the same month a year earlier.

Last month, Starbucks said its customers had initiated some 26 million mobile transactions since the application officially launched in January (see story). One in four customers pays with a prepaid Starbucks card, and the firm now has 3.7 million members in its My Starbucks rewards program, comprised of customers that reload funds into prepaid card accounts and pay for Starbucks products using the cards or mobile apps.

Mobile-payment use also is helping to increase overall store revenue by speeding up transactions at the point of sale and in drive-through lanes, Burrows said.

“We’re adding technologies, such as wireless mobile-payment scanners, building efficiency, driving improvements in our drive-through renovations, and testing many of (those) ideas to improve the customer experience through this expanding platform,” he said.

Starbucks’ total net revenue for its first fiscal quarter was $3.44 billion, up 16.6% from $2.95 billion a year earlier; net income was $382.1 million, up 10.2% from $346.6 million.

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