Starbucks Corp. attributes the widespread use of its mobile payments app to a "seismic change" in how consumers use mobile phones and social media.
The company expects a further surge in adoption as its rewards system expands to grocery stores.
"This month we are doing something that has not been done before, and that is leveraging the unique assets of Starbucks' social digital card loyalty and mobile platform, and taking that into the grocery channel," Starbucks chairman, president and CEO Howard Schultz said in a May 29 presentation.
Starbucks' mobile transaction volume of roughly 4.5 million payments a week is "far greater than anyone in the world in our space," Schultz said at the Sanford C. Bernstein Strategic Decisions Conference. The Starbucks Card is "now a multibillion-dollar business," he says.
Starbucks announced the grocery rewards program in March, when it planned a May rollout. Starbucks has begun distributing bags of coffee with an attached "tag," which the customer will be able to use to earn the same "stars" they earn when purchasing coffee in stores.
"This is just the beginning of integrating card loyalty, social and mobile, in multiple channels of distribution," Schultz says.
Starbucks has been a pioneer in mobile payments, starting in 2009 with a dedicated card app that worked in just 16 of its stores. The following year, Starbucks deployed the system at 1,000 stores built within Target retail stores and eventually rolled out the system nationwide.
The app's immediate effect was to reduce the time customers had to wait in line at stores. Since the app allows users to check their Starbucks Card balance and reload the card account at any time, many chose to do so before they reached the register.
The mobile Starbucks app "is giving us a greater speed of service, higher attachment, higher ticket and higher reload," Schultz says.
"Over this past year and a half, we've noticed a seismic change in consumer behavior," he says. "And that seismic change primarily is due to social/digital media and the rising tide of mobile phones replacing desktop computers."