Starbucks Test Mobile Ordering

Chain to test mobile ordering, paying ahead for pickup later this year

Starbucks on Thursday recorded yet another stellar quarter, saying food sales boosted the coffeehouse chain’s transactions and average check.

The report came as competitor Dunkin’ Donuts relayed somewhat lackluster sales, blaming a challenging macroeconomic climate and competitive pressure during the breakfast daypart.

Starbucks, on the other hand, said sales of its new breakfast sandwiches launched in March increased 40 percent during the quarter. Food attachments continued to grow as the chain completes the rollout of the La Boulange morning pastry lineup, and new lunch offerings to come later this year are expected to further drive later-daypart traffic.

Starbucks’ same-store sales were up 7 percent in the U.S. during the June-ended quarter, with the rollout of new food offerings contributing about 2 percent of that growth. Sales of the new Fizzio hand-crafted sodas, Teavana Oprah Chai and shaken iced-teas also helped build traffic in the afternoon and evenings.

“It’s just the beginning,” said Howard Schultz, Starbucks’ chair, president and chief executive. “It’s clear to us that we have a significant opportunity in the need state of refreshment. And shaken Teavana iced tea and Fizzio have reaffirmed that.”

In addition, Starbucks officials hinted of innovations to come in mobile ordering, saying the company will soon begin testing the ability to order and pay ahead for pick up in units in a major U.S. market later this year.

Starbucks is also in talks with technology and financial companies that could be potential partners in leveraging the Seattle-based coffeehouse chain’s mobile platform in ways that could include the use of Stars rewards as currency – though officials declined to offer details.

Schultz said about 12 million customers in the U.S. and Canada have downloaded the mobile app, and mobile payment now accounts for about 15 percent of transactions, or 6 million transactions on average each week.

How the already busy Starbucks units will execute a program that will allow guests to order ahead, and perhaps to skip the lines for pickup, remains to be seen.

Schultz pledged that it would be done in a way that doesn’t “dilute the Starbucks experience.

“It’s clear to us in our research that express order and pay is a big, big idea,” he said. “A big enough idea that can create significant ‘incrementality’ if done right. And I think the operative phrase here is ‘if done right.’”

Meanwhile, Starbucks is building traffic in the afternoons and evenings, which were traditionally slow dayparts for the morning coffee-focused concept, with the sale of food, as well as beer and wine in some stores.

Troy Alstead, Starbucks chief operating officer, said drive-thru units are another opportunity for growth in the U.S.

About 40 percent of Starbucks 6,800 domestic company units have drive thrus, and those locations have demonstrated double-digit sales growth for the third consecutive year, he said.

Roughly half of the 650 stores scheduled to open in the U.S. this year will be drive thru units. The chain is also looking at improvements that will speed the drive-thru experience in a roll out over the next three years.

Meanwhile, Dunkin’ Brands Group Inc. chief executive Nigel Travis reportedly rallied Dunkin’ Donuts franchisees to set their sights on the “war on Starbucks.”

According to a report in the New York Post, Travis urged franchisees to push more premium menu items, as well as promoting dark roast coffee – which is more similar to Starbucks’ core coffees.

 

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