Starbucks Mobile App TransactionsBII

KEY POINTS

  • The Starbucks mobile app is the most successful in-store mobile-payment app in the U.S. Overall, the app is on track to process over $1.5 billion in payment volume in the U.S. in 2014. In the second quarter it accounted for 15% of the transactions in U.S. company-operated stores, averaging 6 million transactions per week.
  • The app owes its success to four factors: Starbucks stores are everywhere, coffee is purchased habitually, the app incentivizes regular purchases through its rewards-loyalty program, and the app works on the majority of smartphones. The app's success is not due to the ease of payment with a phone. So it has succeeded despite the fact that it is not more convenient than credit or debit cards or cash. 
  • Growth in transactions is slowing, but that's OK. The sequential quarterly growth rate in the number of U.S. transactions made via the app has slowed significantly over the past year. But penetration in the U.S. target market for the app is nearing 50%, so we would expect a slowdown following typical tech-adoption trends. 
  • There are a number of features that could help reinvigorate growth including order-ahead capability and beacon-powered alerts and offers.
  • Other retailers could emulate Starbucks' success. These retailers include quick service restaurants, gas stations, grocery stores, and pharmacies.

PayStarbucksPay and reload tab on the Starbucks iOS app.

We cover the Starbucks payment app regularly because it's one of the few mobile-payment apps in the U.S. that has caught on with consumers.

In this research note we'll look at how the Starbucks app works, why it's successful, whether there's room for usage to grow, and the types of businesses that could have success with a similar app.

 

HOW IT WORKS

1. Loading Value And Making Payments.

The Starbucks app is available on iOS and Android phones in the U.S., Canada, and the U.K., where it can be used at company-owned Starbucks stores. (Forty-one percent of Starbucks coffee locations in the Americas segment are franchises, e.g., stores at airports and bookstores.)

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