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Mobile and gift card payments now represent more than 30 percent of total U.S. payments for Starbucks, CEO Howard Schultz said Thursday during an earnings call. About 10 million customers now pay through the mobile app, he said, with nearly 5 million mobile payments per week.
Through the closed loop mobile app, which launched in 2009, smartphone users display a barcode on their device screen and the barista scans it at the point of sale. The payment is deducted from funds linked to the user's Starbucks Card account, which can be topped up through the app.
During the past holiday season, Schultz said, traditional bricks and mortar retailers for the first time saw in-store traffic "give way to online shopping in a major way." And consumers also embraced physical and digital gift cards more widely.
"Starbucks was prepared for both of these shifts having invested over many years in the creation and development of proprietary world class digital and mobile payment and card technology and expertise," he said during the call.
"This expertise and the assets that support it enabled us to seamlessly process more than 40 million new Starbucks card activation(s) valued at (more than) $610 million in the U.S. and Canada alone in Q1, including (more than) 2 million new Starbucks card activations per day in the days immediately leading up to Christmas and $1.4 billion of Starbucks card loads globally."
There are more than 7 million active Starbucks rewards cards in the U.S. The company launched the cards this month in China, and Schultz said the card has been well received.
Schultz did not address recent reports of a security hole in the mobile app, with passwords stored in clear text. The company said those vulnerabilities have been fixed.
Schultz concluded his remarks by saying traditional bricks and mortar retailing is at an inflection point. "No longer are many retailers only required to compete with stores on the other side of the street. They are now required to compete with stores on the other side of the country. Navigating the seismic shift will continue to be very, very difficult for me."
But he believes Starbucks is well positioned to thrive in that scenario, and he pointed to its digital initiatives as a main reason why.
"We invested and continue to invest well ahead of the curve and today have world-leading proprietary digital, social, mobile payment and card technologies and assets," he said. "These assets are enabling us to broaden and deepen our connection to customers, enhance overall Starbucks customer experience and further (distance) ourselves from competitors.
"And we have a full pipeline of new technological innovations introducing in the quarters ahead that will fully leverage these assets and provide us with even greater benefits into the future. And we are just beginning to appreciate the full magnitude and possibilities of the Starbucks mobile payment platform opportunity."
Learn more about in-app payments.