April 27, 2014
Mobile payments in the U.S are expected to grow to $90 Bn by 2017 from around $13 Bn in 2012, according to forecasts from Forrester. Since introducing mobile payment features in 2011, Starbucks has seen mobile payments increasing to 14% of its in-store transactions in the U.S., up from more than 11% in January 2014, said the company. Now Starbucks plans to explore options for leveraging their mobile-payment technology sector outside of its own chain of tea shops and cafes.
We realized we’ve created something that’s highly viable that’s not only inside Starbucks, but also outside, Schultz said in an interview on financial news network CNBC. Most retailers don’t have the competencies, resources and flexibility to make the investments. We are getting calls from retailers of all kinds. We have an amazing, stunning opportunity within mobile payment and social digital media. We are going to reinvent and create opportunity for new sources of revenue and ultimately profit that’s complementary to our business.
Almost 10 Mn consumers utilize the Starbucks mobile payments app to pay for their coffee, croissants and those blueberry chocolate balls. According to the company, they amount to a whopping 5 Million mobile payments every week. A majority of its more than 8 Mn loyalty reward customers also use its payment apps, said spokeswoman Linda Mills.
They’ve had the most success in their in-store mobile payments and are held up as a shining example. Other businesses look at their success and want to emulate it. There’s a whole cottage industry that crops up to help merchants in the in-store payment space (because of Starbucks.) There’s clearly a revenue opportunity. There’s a significant demand in the market place to have a model similar to theirs, said Forrester Research Sr. Analyst, Denee Carrington. The question is: Do they want to be a technology vendor or do they want to be the world’s most well-known and visited coffee shop? Can Starbucks do that effectively while being a coffee company?
Starbucks controls many of the variables in their system. They can see what their customers’ habits are. What kind of phones they use. They can respond to that directly and suit their own specific needs. They have knowledge about this that they’ve nurtured, Daniel Wolfe, editor in chief at online trade publication PaymentsSource, told MarketWatch. While many payment processors were pitching their services as a way for merchants to cut costs, for Starbucks, it’s successfully used its system to help cultivate brand loyalty and improve customer service — like reducing customer wait time by allowing them to reload the card balance while waiting in line, he added.