Starbucks Digital Tip Effort: Will It Really Translate From Cash To Mobile?
When Starbucks announced on October 4 that it plans to add a way for shoppers to tip Starbucks' associates through its mobile app by next summer, the chain confirmed the latest unintended mobile payment consequence. The nature of a coffee chain is such that using cash is going to be decidedly more dominant than in apparel, consumer electronics, home repair or grocery. The Starbucks stored-value card already cuts into cash payments, but the mobile app threatens an even deeper cut.
The lack of cash payments rips into tips, which hits employee compensation. Not only are tips employee compensation that the retailer doesn't have to fund, but tips can enable employees to be paid less in salary. Mobile payment has far greater convenience, but its ability to undercut tips is something few retailers have seriously considered.
Clearly, this is important to Starbucks. It's important enough for the company to violate one of the golden rules of mobile app announcements: Never announce a capability before it's deployed. In this case, Starbucks announced on October 4, 2012, a feature that it is not even promising until summer 2013, which could be as long as 11 months away. It seems the coffee chain felt a barista revolt was about to boil over—or should we say Starbucks had grounds for such concerns? (Both coffee plays-on-words are equally bad, so it's hard to choose.) Will a mere announcement of vaporware be enough to calm the caffeinated waters?
Even worse, there is a question about how well tips will translate from cash to digital. It's very efficient, and almost instantaneously quick, to pay for coffee with a $10 bill and then take some of the change—perhaps all of the coins and maybe some paper—and drop it into the tip mug.
For many experienced Starbucks shoppers, it's often one seamless movement. The phone, though, will require additional time to select a tip, think about and figure out the amount, key it in and then hit save. That process may not be especially onerous, but compared with the existing cash tip approach, it's not a given that tips won't suffer. Also, the deliberate thought required for the mobile app may further reduce tips.
Ahhhhh, unintended consequences. Mobile is full of them.