Success seems to come easily for Starbucks' mobile payment efforts, but only because the company did its heavy lifting elsewhere.
The company now handles 19% of its U.S. sales through its mobile app, and is set to expand that with the new Mobile Order and Pay feature it has been testing in the Pacific Northwest. Any company that has struggled to get its own mobile payment system off the ground was likely unnerved to hear Starbucks CEO Howard Schultz describe the Seattle coffee chain's recent achievements as almost a happy accident.
Mobile Order and Pay "is going to be a much more seamless integration than we really anticipated, both in terms of customer response and level of convenience," Schultz said last week during a conference call to discuss the company's earnings. In testing, Mobile Order and Pay exceeded every internal goal set for it, executives said.
So why should Starbucks have such good performance when an almost identical app, Square Order, was pulled from the market less than a year after it launched especially since Square benefited from having Schultz on its board for a year?
This question is increasingly important as Starbucks explores the option of providing its mobile payment technology as a white-label offering to other companies. Starbucks shifted the roles of its top execs at the start of 2014 to enable Schultz to devote more attention to this initiative, but the company has remained largely silent about the effort ever since.
Whatever happens, Starbucks clearly does not expect its white-label service to work for everyone.
"The area that I think we have opportunity certainly is with our in-store partners," said Kevin Johnson, Starbucks' president and chief operating officer, during the call. "We've got a tremendous opportunity to step up our game in that particular area and were going to do more there."
Starbucks has long insisted that its mobile app's success is built on the foundation of other programs, in particular its stored-value card and its rewards. Its mobile technology benefits from the loyalty the coffee chain earned through those earlier efforts.
"Starbucks is pretty top-of-mind for a large number of users out there," said Bryan Yeager, a payments analyst with eMarketer, in an interview. "For them, mobile is an enabler. This is not just a matter of the convenience of being able to pay with your phone. It's an extension of the brand and not just a new way to pay."
To add mobile ordering, Starbucks didn't have to overhaul its process for selling coffee; all it really had to do was put in a printer to receive orders at the store.
The Starbucks approach to mobile is indeed applicable to other businesses, but only for those businesses that have purchase flows very similar to Starbucks, said Thad Peterson, a senior payments analyst with the Aite Group.
"This is immediately applicable to high-frequency [Quick Service Restaurants]; Taco Bell, for instance. It works really well there," Peterson said. "But it's far less applicable with Walmart."
With Starbucks, "it's much more about time than it is for most other categories," Peterson said. "With a QSR, there's a finite objective. I know what I want and I know when I want it. If I go to Walmart, I have a list and part of the experience is exploring the aisles and finding other thing. It's more of a shopping behavior than a buying behavior."