Starbucks tackles order-ahead issues (SBUX)

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Starbucks is planning to test a mobile ordering-only store at its Seattle headquarters, according to a letter to employees reported on by Reuters. The location, which will replace one of the stores in Starbucks’ company headquarters, will process all mobile orders in the building, and feature a prominent pickup window rather than a counter, according to TechCrunch.

Right now, Starbucks hasn’t discussed any plans to trial such a method anywhere else, but if successful, it’s plausible the firm could use the Seattle location to kickstart a pilot.

Such a move caters to rising mobile ordering habits.

  • Starbucks mobile ordering is rising quickly. In Q4 2016, 27% of total in-store purchases at US Starbucks locations were made via mobile app, according to the firm’s earnings call. Specifically, the firm’s mobile ordering option, titled Mobile Order & Pay, now comprises 7% of total Starbucks orders, and a much higher percentage at busy locations during peak hours. That’s a quick rise in just over a year and a half, and one that’s reflective of national trends.
  • But that’s created unique problems for the coffee chain. Mobile order-ahead is becoming so popular and demand is rising so rapidly that employees are beginning to have a challenging time keeping up with mobile orders. That results in a bottleneck of crowds and long waits for mobile orders, ultimately reversing the purpose of a program intended to add convenience and save time. This is a problem that’s been seen industry-wide — Panera Bread recently noted that it had to add staff in order to keep up with digitization of ordering — and something Starbucks will need to combat. 

Mobile-only locations could be a way to help resolve these tensions, making the move a worthwhile experiment. Starbucks told Business Insider in March that the firm is taking steps to manage the congestion and evaluating potential solutions. This move proves that it’s doing just that. Considering that the headquarters store is one of the top three mobile order-ahead locations in the country for the chain, the move could prove to be a solid litmus test for whether or not dedicating staff or full locations to mobile ordering could be worthwhile in high-volume locations. If it is, it’s possible that we might see similar stores, or this type of model, begin popping up elsewhere in the country.

Retailers like Starbucks and Dunkin' Donuts are winning over consumers with their mobile wallets — apps developed by stores to make it easier for their customers to pay, and to deliver valuable perks. 

And these retailer wallets are leading the overall mobile wallets industry, thanks to their ability to rapidly push out innovative features like rewards programs, coupons, mobile order-ahead, and custom marketing.

This may be surprising considering that retailer mobile wallets can be used only at a specific retailer’s locations; in contrast, popular universal mobile wallets like Apple Pay and Samsung Pay can be used at multiple retailers, as long as users are using the necessary smartphones.

Ayoub Aouad, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on retailer mobile wallets that assesses what makes them so successful and which retailers can most effectively leverage the technology to push sales, traffic, and average ticket size. The report also outlines what makes these mobile wallets attractive, and discusses some of the advancements being made in the payments industry that will affect mobile wallets' growth rate.

Here are some key takeaways from the report: 

  • Retailers with large addressable user bases who are loyal, repeat visitors, will see their mobile wallets continue to be popular with consumers, especially as there continues to be slow merchant adoption of near-field communication (NFC) technology as well as weak offerings by universal mobile wallets like Apple Pay and Samsung Pay.
  • Loyalty programs will be a significant driver in retailer mobile wallet adoption. Companies like Starbucks and Dunkin' Donuts have been able to leverage their loyalty programs to acquire mobile wallet users, which, in turn, has driven store traffic and conversion rates.
  • By leveraging these programs, sales are expected to grow at a five-year compound annual growth rate of 68%.
  • However, adoption will begin to decelerate as a result of increased competition by 2020. As universal mobile wallet players begin to add effective loyalty programs and coupons to their offerings, adoption for retailer-based mobile wallets is likely to slow down because these offerings are their main marketing points. 

In full, the report: 

  • Explains what hurdles universal mobile wallets have faced.
  • Details what features retailers have adopted into their mobile wallets that have been successful  
  • Analyzes the use cases of retailers that have successfully leveraged their mobile wallet offerings to push growth.
  • Identifies how universal mobile wallets will eventually slow growth for retailer-based mobile wallets.

 Interested in getting the full report? Here are two ways to access it:

  1. Subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> START A MEMBERSHIP
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