Two Key Initiatives Which Can Drive Sales For Starbucks

by Trefis Team
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Starbucks‘ (NYSE:SBUX) Mobile Order & Pay app has been immensely successful, leading to higher volumes through the convenient app. However, this success has been causing some congestion at its stores, and long lines of customers waiting to pick up their orders (placed via the app) have actually been driving some customers away. The company partially attributed its slower comparable sales in Q1 2017 to this issue. (Read Here’s How The Success Of Mobile Order and Pay Is Negatively Impacting Starbucks)  However, Starbucks is working aggressively to resolve this issue, and it appears that the company has found a solution: it has started sending text notifications to customers when their orders are ready in order to reduce the congestion at the pick-up point. While this adds a step to the order process on the app, it is likely to reduce store congestion to an extent. The company is also considering other measures, such as adding more employees to its stores and redesigning the store layout to resolve the congestion issue. As Starbucks looks to address this issue swiftly, the mobile app can become a key driver of sales for the company. Through the convenience of the app and shorter wait times, Starbucks can serve more customers in its stores, thereby driving revenue growth going forward.

Starbucks is also making changes to its menu in order to broaden its customer base. The company recently rolled out gluten-free breakfast sandwiches and vegan menu items to cater to evolving customer tastes and dietary requirements. Demand for gluten-free food is on the rise; according to a research report from Technavio, many customers are willing to pay a premium for gluten-free products, and the market is expected to grow at a CAGR (compound annual growth rate) of 6% through 2019. By 2020, the market for gluten-free foods in the U.S. is projected at over $7.5 billion. Starbucks’ focus on evolving consumer preferences should allow it to broaden its customer base.

Despite the congestion-related issues, Starbucks’ success with its mobile app bodes very well for the future. A smooth resolution to the congestion issues would allow mobile orders to become a significant long-term revenue driver for the company. Similarly, as it adapts to changing customer preferences and makes additions to its menu accordingly, the company should be able to broaden its consumer base and drive sales growth.

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