Starbucks continues to see growing adoption of its mobile order ahead feature as the coffee giant posted yet another strong quarterly earnings report on Thursday.
The Seattle company reported a record $5.4 billion in revenue last quarter, up 12 percent from last year, and earnings per share of 46 cents — both of which were right around what analysts expected. However, the company’s stock is down nearly 5 percent in after-hours trading.
On the earnings call with analysts, Starbucks executives lauded the company’s Mobile Order and Pay program, which first launched in Portland more than a year ago and allows customers to skip the line by ordering in advance from their phone. The feature went live across the entire U.S. in September, covering more than 7,400 stores, and is also being tested in Canada and the U.K.
Kevin Johnson, the company’s president and COO, said that Starbucks is now processing more than 6 million Mobile Order and Pay transactions per month. There were 1 million U.S. customers that used the service last month. Usage is particularly high in busy stores where morning peak demand is high — in many of those stores, Johnson said that Mobile Order and Pay orders exceed 10 percent of total transactions. It’s also helping reduce line congestion.
“We have just scratched the surface,” Johnson added.
Starbucks Chief Digital Officer Adam Brotman said that the company has a “robust road map” for additional features coming to the order ahead program this year.
“There will be the ability to use or earn My Starbucks Rewards in the Mobile Order and Pay flow; the ability to favorite stores and items; and suggested and recommended selling,” Brotman said.
Starbucks saw some impressive growth in its food sales, with breakfast sandwich sales up 40 percent and bistro box sales up 65 percent from last year. Johnson noted that the order-ahead feature helps drive food sales because Starbucks can target offerings to individual customers and encourage them to try new items.
“What we find is that once we encourage trials, that starts to lead to repeatability,” Johnson said.
Starbucks CEO Howard Schultz had some interesting comments about Mobile Order and Pay in China, which has yet to launch in the country. But when it does, Schultz said it will be a “runaway success” because of how embedded the smartphone has become in a Chinese consumer’s life today.
“The adoption that we believe we will have in China will be more significant and quicker than it has been in the U.S., which has already stunned us in terms of how quickly the U.S. consumer has embraced it,” Schultz said.
Schultz’s words echo what we heard from Kelly Smith, the VP of Digital for Starbucks China and former Seattle startup veteran who we met with in Shanghai this past November.
“We think the market situation would be very friendly and receptive to those types of offerings that we already see back home, perhaps even more so,” Smith said. “… The appetite is there, the customers are waiting, I think their affinity for the brand is remarkable here, everything is in place. Now it’s about execution.”
Beyond the order-ahead feature, Starbucks continues to see growth with its My Starbucks Reward loyalty program. There are now 11.1 million members in the U.S., which is up 23 percent year over year. More than 21 percent of total U.S. transactions were paid using Starbucks’ mobile app, Johnson said, which is in line with numbers from the previous quarter.
“A key element of our strategy is our Starbucks reward loyalty program combined with digital engagement,” Johnson said.
Schultz added that as Mobile Order and Pay continues to roll out around the globe, it will have “a significant effect on the overall growth of the business.”
The CEO also touched on Starbucks’ continued growth with global in-store sales and traffic, which increased 8 percent and 4 percent from the year-ago quarter, respectively. While other brick-and-mortar retailers are struggling to draw people in and many have closed their doors, Starbucks is attracting even more customers to its stores.
“We have insulated ourselves from the brick-and-mortar problem that will face many retailers as a result of the experience that we created, the innovation both in product and partner investments, as well as our technology,” Schultz said. ” … We see no signs whatsoever that we are going to be hit in any way by the seismic change in consumer behavior because we invested ahead of the growth curve and continue to invest in those things that are customer-facing, partner-facing, and technology.”
Starbucks is certainly a leader when it comes to food and beverage companies that are utilizing new technologies. The company this week announced a partnership with Spotify and last month began testing a delivery service with Postmates.