Starbucks CEO throws down mobile payments gauntlet

Starbucks has dominated the mobile payments market over the last year, with 90 per cent of mobile transactions made in its stores. But according to Starbucks CEO Howard Schultz, the coffee company is just getting started.

In 2013, payment for purchases by use of all mobile devices in the U.S. totaled $1.3 billion. Starbucks processed the lion’s share of these transactions, and is poised to take advantage of the rapid acceleration in mobile purchases that is long since due. Sixteen per cent of the coffee company’s US sales take place via mobile device, and it is planning to invest in making this figure all the larger in the near future.

In yesterday’s earnings call, Schultz confidently boasted that the coffee company is well positioned to lead the way in mobile payments, even outfoxing established technology players with hordes of software engineers.

“While these companies may have vast hardware and software development capabilities — and this is the key point here — Starbucks is the only local, national or global business of any kind to succeed in crossing the both the most difficult and the most critical chasm standing between success and failure in mobile payments: Transforming consumer behaviour,” Shultz said.

The Starbucks rewards programme has been the key to its success, as the store simply moved its well-used rewards card model onto mobile. Many other companies since have attempted to tie mobile payment to loyalty.

“We are now receiving great interest in partnerships from mobile payment companies who see the value of our rewards programme and the mobile payment behaviour we have established,” Shultz added.

But by tying with other companies – Schultz failed to mention who the company may be in talks with – Starbucks does not plan to completely give away its lead.

“We are playing offense here. We understand that there is a macro issue, and a consumer shift,” he said later in the call. “And we began that last year right after holiday, and come this holiday and calendar [2015] we are going to be in a position to win. End of story.”

The Seattle-based coffee giant reported 5 per cent sales growth across stores, booking $4.2 billion in revenues and marking the 19th consecutive quarter that it has seen sales growth of 5 per cent or more. But Wall Street had slightly higher expectations of $4.23 billion, troubled investor led to a fall in shares in after-hours trading.

Related reading

Leave a comment