How Dunkin' and Starbucks apps set the stage for retail's future

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Coffee and doughnut shops such as Starbucks, Dunkin’ Donuts and Krispy Kreme have been at the forefront of mobile payments, and this technology could soon develop into a completely cashierless experience.

Order-ahead capabilities don't quite emulate the smoothness and spontaneity of something like Amazon Go, but they train a large number of customers to buy coffee and doughnuts with minimal human interaction.

Starbucks, a pioneer of mobile ordering and payment technology, has been making headlines with its Uber Eats deal and using China as a testing ground for launching a national delivery service in the U.S. Starbucks already has 16.8 million active members in its U.S. loyalty program and 41% of U.S. in-stores sales by dollar volume is generated through its mobile app as of its second quarter. Order ahead represents 15% of Starbucks total transactions in the quarter.

Dunkin’ Brands launched its rewards program DD Perks in 2014 and now counts 10 million members across the U.S. Trailing behind its competitors, Krispy Kreme is offering consumers a free doughnut to sign up for its rewards program and plans to plans to give away one million free doughnuts on Friday, which is National Donut Day.

All of these efforts are about not only selling coffee and doughnuts — they're about collecting data.

“The Starbucks app was never designed to be just about the payment. It was designed to get to know the individual customer and build a relationship with them. Dunkin’ Donuts and Krispy Kreme recognized this are playing catch up since Starbucks has the first mover advantage,” commented Richard Crone, principal at Crone Consulting.

Dunkin’ has been very active in turning to mobile technology to combat competitive pressure. Last July, Dunkin’ extended its deal with mobile app maker CardFree to prep for future digital initiatives including catering, delivery and curbside pickup. While CardFree may have built Dunkin’s mobile order ahead and payment platform, the doughnut chain is also trying to keep up with Starbucks and how mobile technology is transforming the coffee chain’s business.

“In three to five years, more than two-thirds of Starbucks’ business will be through order ahead, which will force them to reconfigure the store, increase same-store capacity by at least 40% and move to an autonomous check-out/check-in model,” Crone said. “A Starbucks store will look different, perhaps more like an Apple Store today.”

Starbucks, Dunkin’ Brands and Krispy Kreme did not provide comment by time of publication.

Autonomous checkout is still in its infancy with many companies testing the technology out, including Standard Cognition, which opened its first cashierless store in San Francisco last September. While Amazon may have a handful of its Go stores currently in operation across the country, it is reportedly considering opening 3,000 nationwide by 2021. But those are plans that need capital and technology to work together. In the case of Starbucks, its mobile app and AI-fueled business plan may actually make autonomous checkout happen much sooner.

Kevin Johnson, CEO of Starbucks, recently told CNBC that the company is very heavily leveraging data insights to fuel not only its future strategy but also to determine what to cross-sell to its loyal customers.

“By having customers check in to retrieve their order," Crone noted, "Starbucks can use autonomous checkout to present them with AI-selected cross-sell items placed next to their order. The customer won’t need to check out at the register. They can take the item and leave. That’s what has got every QSR worried about.”

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