Mobile Ordering’s Unintended Consequence for Starbucks

Customers perceive crowds waiting for their mobile orders as overall store congestion, and leave without making a purchase.

January 30, 2017

SEATTLE – Last week Starbucks reported financial results for its 13-week fiscal first quarter that ended January 1, 2017, citing achievements in the mobile space, as well as a few operational challenges the rise in technology is bringing.

The chain cited a record $2.1 billion loaded on Starbucks cards in the U.S. and Canada in Q1, up 15% year-over-year, while Starbucks-card transactions reached 40% of U.S. company-operated transactions. Active membership in Starbucks Rewards grew 16% YoY to 12.9 million members in the U.S., while mobile order and pay represented 7% of U.S. company-operated transactions, up from 3% in the prior year; and mobile payment reached 27% of U.S. company-operated transactions.

However, Starbucks said same-store sales grew 3% during the fiscal first quarter, which is short of the 3.9% estimate, reports CNBC. Starbucks President Kevin Johnson said that same-store sales growth was hindered, in part, by growing mobile pay and ordering.

The news source notes that Johnson said the increase in mobile ordering had caused many stores to experience congestion at the hand-off counter. While lines at the register were short, incoming customers would see the crowd and leave without making a purchase.

"We are now laser-focused on fixing this problem, but the nature of it, too much demand, is an operational challenge we have solved before and I can assure you we will solve again," said Starbucks CEO Howard Schultz on a conference call.

Business Insider reports that Shultz, when asked for specific solutions like rearranging the stores or hiring more people to handle the bottleneck of orders, responded that the company would find a fix.

"We are facing this congestion problem and the anxiety of the customer," he said. "It is a problem that we will solve. It won't take us that long. We have been on it now for 30 days, and in the quarters that follow we will get back to the experience that you have come to expect."

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