Newsmaker: Howard Schultz
Its about the most unlikely thing you could buy online, but Starbucks is among the US leaders in digital commerce.
The coffee chain’s quarterly numbers were not strong enough to satisfy investors craving a strong brew last week, but analysts believe its long-term growth strategy is solid.
Shares of the world’s largest coffee chain fell nearly 6pc on Friday, a day after Starbucks reported second-quarter comparable sales growth below Wall Street’s expectations. But the stock is not too far from the record high it hit in October. It has risen 16pc from its 2016 low touched on February 8, beating Dunkin’ Brands and McDonald’s.
The difference is digital.
Starbucks chief executive Howard Schultz has made mobile payments a priority for the business.
At one point, he even threw out the idea that Starbucks’ digital stored-payment cards could become a broader currency that could be used by other retailers.
There’s certainly no prospect that Starbucks will allow its own payment apps to be elbowed out of the coffee queue by alternative payment products such as Apple Pay and Google Wallet.
Under Schultz, Starbucks has been investing in digital initiatives such as Mobile Order & Pay, which lets customers place orders and make payments through an app on their smart phone and then pick their orders up from an outlet.
Consumers are increasingly using their smartphones to shop and they are eating out more regularly, and Starbucks is in a pole position to capitalise on this.
Starbucks Mobile Order & Pay usage doubled in the second quarter of the fiscal year, with the company processing a staggering eight million transactions per month that bypass traditional payment channels like cash and cards.
“We believe Starbucks’ mobile platform is truly in a league of its own,” analysts at Wells Fargo Securities said.
“We remain convinced that Starbucks’ digital platform, including the rapidly growing Mobile Order & Pay, continues to be a significant competitive advantage and long-term sales driver,” BTIG analysts wrote in a note.
The march online hasn’t all been mocha smooth. Starbucks annoyed customers by tweaking its loyalty programme to reward high spenders more than frequent shoppers, but that only highlights how integrated its offering is into customers’ lives.