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Here's Why Starbucks Is Bringing Mobile Ordering Nationwide

By Daniel B. Kline - Sep 24, 2015 at 7:20AM

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Starbucks processes nearly 9 million mobile transactions each week and this week it more than doubled the number of stores where Mobile Order & Pay is an option.

Source: Starbucks.

The biggest problem facing most Starbucks (SBUX -0.95%) locations may be one caused by the chain's success.

Lines can be long, and a complicated order -- or even someone doing an office drink run buying a long list of difficult drinks -- can make things go even slower. This leads to a diminished customer service experience, and it may result in people sometimes deciding to get coffee elsewhere rather than wait for an army of people to order their soy, half-caf, three-pump, no-foam Pumpkin Spice Lattes.

To solve this, the coffee chain has been testing a mobile ordering system tied to its app. The technology, which had been implemented in over half of its United States stores by this summer, lets people order and pay for their drinks without waiting in line.

It's a simple solution that eliminates the choke point in the company's sales process. And, in addition to making it easier for customers to get their order filled at busy stores, mobile ordering may also be increasing sales.

A faster rollout
While Starbucks has not released any dollar figures or specific sales numbers for the roughly 4,000 stores using the new technology, it's successful enough that the chain sped up its implementation.

"We have a winner and it's running ahead of our expectations," CFO Scott Maw said at a Goldman Sachs event in mid-September. Starbucks began rolling out the mobile order and pay functionality in December 2014, then expanded the test in March 2015 and again earlier this summer to more than 3,400 locations in 17 states. On Tuesday, it announced the feature is now available on iOS and Android devices for more than 7,4000 company-owned locations across the U.S. Starbucks plans to introduce the feature internationally by 2016.

How successful is it?
Mobile payments accounted for about 20% of the company's total sales in August, with about two-thirds of that being from Mobile Order & Pay, Investor's Business Daily reported. Those are impressive numbers when you consider that the system had only been offered on iPhones. The company says it processes nearly 9 million mobile transactions each week.

The success of the system is also leading Starbucks to continue to invest in improving the technology. This will include offering customized local menus based on specific stores, according to the CFO.

"What we're seeing around Mobile Order & Pay is ... incrementality broadly across all the store types, and we're seeing increased incrementality and increased overall metrics as we roll different waves. So every wave is stronger than the one before," he said. "I think that's due to the fact that we're getting a little bit better operationally on how to execute this."

Maw explained that the size of stores limits how much personnel the company can use at the register and in the production area. Mobile orders feed directly into the chain's point-of-sale system, allowing labor to be moved from taking orders into making them.

This is a double win
Starbucks has achieved something important, here. It has improved customer experience, and that in turn has led to people spending more money in its stores.

Mobile Order & Pay is a technological solution to a non-technical problem. Even if it takes the same amount of time for a drink to be made, that won't matter, because customers won't have to spend that time waiting in line. 

This is a major achievement for the coffee chain that other crowded fast-casual eateries offering made-to-order food might do well to copy.

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