Starbucks expanding Mobile Order and Pay

Mobile is driving strategy at Starbucks (NASDAQ:SBUX) as the company plans to expand Mobile Order and Pay to 600 locations following a successful, single-market test.

Roughly 60 percent of Starbucks customers are using the company's mobile pay app. That's 13 million U.S. customers for more than 7 million mobile transactions in stores each week, Starbucks CEO Howard Schultz told analysts during a conference call to discuss fourth quarter financial results.

Mobile Order and Pay was introduced in 150 Portland, Oregon stores. The app allows users to order food and beverage through a mobile device, pay on the app and pick up the completed order at a designated location. The program was such an early success, Starbucks will roll it out to 600 more stores in the Pacific Northwest in the coming months and to all stores nationally this year.

"Our experience to-date confirms that once fully rolled out, Mobile Order and Pay will drive a significant increase in mobile payment transactions in our stores overall and have a flywheel positive effect on our overall business, driving both increased MSR membership and app usage and creating significant additional one-to-one marketing opportunities," said Schultz.

Mobile isn't just being used for customer-facing initiatives, the chain is investing in technologies to improve access to core business tools and resources, and is working with partner apps to facilitate viewing work schedules from a personal mobile device.

Starbucks executives noted the proprietary nature of the Mobile Order and Pay technology—and the fact that it's stacked on other existing platforms including Starbucks' mobile rewards and payments—the simplicity of which lets the company speed the new service to market and do so fairly economically.

The mobile programs are also enhancing customer loyalty and lowering the cost of customer acquisition, "especially when you compare it to other national retailers," said Schultz.

The program has also been seamlessly integrated into the behind-the-counter workflow, said Cliff Burrows, group VP, U.S. and Americas.

"It is totally intuitive and we took the existing flow in the store, have built a printer into the register lineup and so it is an absolutely seamless experience for our baristas," he said. "And it doesn't change the routine for the bar… It has been seamless and we are delighted by the way the customers, from day one when we are down in the market, and our partners have embraced this and that's why we are still confident we can meet this 2015 rollout."

And the app hasn't been made available on Android yet, just iOS.

Mobile and other digital efforts are the main components of Starbucks' strategy for the first quarter.

"We will soon be launching a pilot project around express locations in New York that will offer streamlined assortment of food and beverage offerings and integrate Starbucks' mobile payment and mobile order intake functionality in order to enhance customer convenience and provide even faster service in these locations," said Schultz.

For more:
-See this conference call transcript on Seeking Alpha

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