Suspect that your Starbucks (NASDAQ:SBUX) cafe has gotten more crowded lately? Don't worry; it isn't just your imagination. The coffee giant last week announced that a 4% gain in customer traffic powered record business results over the last three months.
That might sound like a tiny increase, but it's actually huge for a business of Starbucks' scale. According to CEO Howard Schultz, the boost translated into 23 million more customers served last quarter, or the equivalent of 25 additional visits every day at each of its 10,000 locations. The traffic bounce, plus 3% higher average spending and 90 new cafe openings, combined to push sales up by 18% last quarter to a record $4.9 billion.
Starbucks is facing the best challenge you can have as a quick service restaurant. Rather than worrying about how to create demand, it has to figure out ways to process the demand that already exists. Here are two key strategies the company is implementing to deal with what's become its most powerful competitor: The line you see when you walk into a Starbucks cafe.
Order and pay online
It didn't take long for Starbucks' mobile ordering program to prove a worthwhile investment. The company piloted the service, which lets users shop, select, and pay for their orders through an iPhone app, at 150 stores in Portland, Ore., last December.
Starbucks was so happy with the results that it scaled the program up to 700 locations in March. Now it's available at over half of the store base and will be in all cafes in time for the holiday shopping crush next quarter.
That means the biggest benefits to the business are still to come. "Mobile order & pay is enabling us to serve more customers more quickly and efficiently -- and to significantly reduce attrition off the line," Schultz told investors in a conference call. The stores that have it in place boast shorter lines and quicker service. "The net result is increased traffic, improved throughput and an elevated Starbucks experience for our customers," he said.
Visit a tiny shop
Hoping to expand on its successful drive-thru store format, Starbucks just opened its first "express" store in New York City. The 538 square-foot space is aimed at serving a busy Wall Street crowd. It's part of a four-store pilot project that will roll out in the city over the next few months.
While its only been open for a few weeks, Starbucks called the early results out of this location "nothing short of extraordinary." The little shop is handling customer volumes that management would expect to see out of a store three times its size.
And perhaps the best news is that surrounding full-size locations just a few hundred feet away aren't seeing any negative impact from the express store. This is yet another piece of evidence suggesting that Starbucks has plenty of room to expand, even in a U.S. market that has over 7,300 locations.
Never stop innovating
The mobile ordering program and the express store format are two line-cutting strategies that have already graduated from pilot mode to become official parts of the Starbucks experience. They're already reducing wait times.
Starbucks has other major efficiency innovations that aren't quite ready for prime time yet. The biggest of these right now is a home and office delivery program set to start piloting in Seattle and New York City in the next few months. There's no better way to shorten cafe lines than by satisfying beverage demand without requiring a customer even set foot in a Starbucks store.
Demitrios Kalogeropoulos owns shares of Starbucks. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.