Here’s How Opening Up Its Mobile Order & Pay To All Customers Can Impact Starbucks

Starbucks’ (NASDAQ: SBUX) mobile order and pay platform has been a mixed bag. While the company pioneered this concept which became a key sales driver for Starbucks, it also caused congestion problems at the hand-off plane, impacting comparable sales negatively. However, given the tremendous success of this platform, Starbucks is now opening up this platform to all customers – irrespective of their membership to the company’s “Rewards” program. “Starbucks Rewards,” the company’s loyalty program saw a 11% year on year increase in membership in fiscal year 2017 and currently 36% of its tender comes from this loyalty program, most of which is via the mobile payments platform. By expanding the mobile order and pay platform to all its customers Starbucks is looking to establish a digital relationship with them and expand the customer base which it can engage. Restaurant companies are benefiting tremendously from their digital relationships with customers. Targeted promotions, personalized recommendations, and a digital connect are helping companies increase traffic at stores and McDonald’s is one example of a digital success story. Starbucks has seen similar success with its Rewards members.  In the fiscal year 2017, the company saw an 8% year on year growth in comparable sales from its rewards program customers. Starbucks believes that this growth was primarily due to a digital engagement strategy driven by personalized recommendations.

If this engagement is expanded to the entire universe of customers by expanding the mobile order and pay platform, the company believes that it can see strong growth in sales. Out of the estimated 75 million unique customers visiting a Starbucks store every year, 13.3 million have signed up for Starbucks Rewards. The company sees a huge upside in the ability to digitally engage the rest of its customers by opening up the mobile platform to them.

We believe this strategy holds strong potential and results of this growth plan should be visible in late next year. We will be watching comparable sales growth of the company closely in fiscal year 2018 to quantify the impact of this strategy.

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