Article
Starbucks continues to take the lead on mobile payments
Coffee company touts success of its mobile payment program in Q3 earnings call.
July 28, 2011 by James Wester — Editor 1, Mobile Payments Today
In the ongoing debate over why a company should offer a mobile payment option, one of the biggest hits against mobile payments is the feeling it's a solution looking for a problem. If cash and cards work just fine, why integrate mobile payments at the point of sale?
Starbucks may have provided some strong arguments for payment innovation being its own reward. The Seattle-based coffeehouse giant reported record revenue, operating income and earnings per share for its third quarter and CEO Howard Schultz credited the company's mobile payment program for some of that success.
"I'm pleased to report that our innovation pipeline is robust, and we are seeing significant benefits from the investments we're making in mobile payment technology," Schultz told analysts.
Overall, Schultz said Starbucks' consolidated revenues were up more than 12 percent, or $2.9 billion, over the same period last year. He said store traffic is up and customers are reporting Starbucks is delivering not only improved product quality and product taste, but improved speed of service as well.
"Our research shows that mobile payment drives store traffic and also increases speed of service," Schultz said.
Schultz also noted the company's efforts to expand the mobile payment program in the last quarter.
"In Q3, we responded to customer demand for increasingly faster ways to pay for Starbucks purchases by introducing a Starbucks app for Android devices," Schultz said, "enabling Android users to load money on their devices' speed transactions and manage their Starbucks Cards more effectively."
The company released the much anticipated Android version of its mobile payment app in mid-June. When the payment program was first released in January, only consumers with iPhones and Blackberry devices could participate. Even without an Android app, the payment program reached three million transactions within two months of its launch.
Starbucks also introduced updates to the iPhone version of the app in the third quarter. New functions include an option that lets customers send a Starbucks Card eGift to anyone, Schultz said.
According to Schultz, there are currently 1 million mobile devices with the mobile application installed. He also said those mobile devices have more than $50 million already loaded on them for use at company locations. And the program remains popular. Schultz said reloads are tracking well ahead of plan.
The Starbucks mobile payment platform is one of the largest mobile payment networks in the U.S., said Schultz. The system is available at nearly 8,000 locations, including all 6,800 company-operated stores and 1,000 Target stores and the company expects 1,000 Safeway locations will gain access to the platform by the end of the year.
Starbucks' mobile payments are built on a closed-loop system that links pre-paid Starbucks gift cards to barcodes generated by the mobile application. The barcodes are read by scanners at the point of sale. Users can pay for their purchases as well as track their reward points, find Starbucks locations and top up their accounts via their phones.
The application was built for Starbucks by mFoundry Inc.
For more on this topic, visit our research center on point of sale solutions.
(Quotes from the conference call are from the transcript provided at SeekingAlpha.com)
