Posted by:Ranjani Rao April 11th, 2014

Wake up and smell the coffee.

Starbucks made over $1 Billion from mobile transactions last year.

Yes, billion with a ‘B’. From payments made in-store. At the register. On a mobile phone.

According to data from BI Intelligence, 10 million customers use Starbucks’s mobile payment and loyalty app program in nearly 5 million transactions every week in the US. This exceptional success is a result of intelligent leveraging of the mobile platform by Starbucks and has set a rather formidable benchmark among other retailers.

So, what did Starbucks do right and what lessons can retailers learn from their phenomenal accomplishment? I will list 3 key takeways

1)   A finger on the pulse of the market: 

While understanding the customer and catering to her needs is important for every business, it is more so for retailers. And Starbucks has it down pat. From offering free Wi-Fi way before it became passé, to employing the smartphone, Starbucks has been catering to their varied target audience of busy office goers, students, professionals and harried soccer moms. Be it macchiato, green tea lattes, app loyalty programs or mobile payments, they have taken the time to listen to what consumers want and have provided those conveniences. So, an app that lets the buyer pay through his phone while not waiting in line and rummaging for change is a right step in this direction.

2) Understanding that it’s just not another ‘mobile app’ 

“The mobile is the future and the future is here.” “Retailers need to be on the mobile because that’s where the consumers are.” Headlines like these have fueled the growth in custom mobile apps and responsive websites by retailers. But Starbucks never entered the mobile space because they felt everyone around was in it. They saw a real business opportunity in it. For them, it was a chance to reward customer loyalty, increase engagement and drive new business every day. There was a definite purpose to their mobile strategy and every single app feature drove them towards this goal. For example, digital tipping, shake-to-pay, customer birthday rewards, social sharing of rewards milestones, customized dashboards, integrated account history are features born as a result of careful research into consumer behavior. A lesson that a well though out “mobile strategy” is critical.

3) Using the mobile to create new avenues for business growth 

In a recent interview on CNBC, Starbucks CEO, Howard Schultz hinted at creating a new source of revenue utilizing their leadership in the mobile payment technology market. With a flood of retailers, eager to leverage mobile commerce and loyalty programs, Starbucks has literally carved a new, complementary source of business growth for itself by having the capability to white label their technology for use by others. Mobility has been a major disruptor in the retail industry, and Starbucks is riding this wave all the way to market leadership and increased profits.

There you have it, simple lessons that Starbucks brewed to perfection. And the results are for the tasting – Mobile payment now represents 14% of all Starbucks in-store transactions in the U.S. while loyalty members make 25% percent of all transactions.

So retailers, go ahead, brew your own success story! I would love to hear them

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