Commentary

Starbucks & Building Mobile Payments from an Established Base

Mobile payments may not be mainstream everywhere, but they sure are rolling at Starbucks.

In the course of reporting its financial results for the latest quarter yesterday, Starbucks noted that the company added 896,000 new My Starbucks Reward members, taking the total to more than 9 million.

Perhaps more significantly, Starbucks said it is hitting around 7 million mobile transactions a week with more than 13 million customers actively using the company’s app. About 16% of payments at Starbucks now come from mobile.

The big lesson here is that Starbucks didn’t just one day drop the idea of mobile payments on customers in hopes that people would download an app and try it out.

Over time, they built a base of loyal and regular customers who were treated to free, in-store downloads along with their Wi-Fi. The activity became repetitive.

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Building from a base for a major mobile innovation is generally a much easier path.

For example, when Apple introduces a new product or service, it also has base from which to work. Millions of consumers already are used to making digital purchases via the iTunes store, so to add an additional thing for sale or a new payment feature is hardly a stretch.

The hurdle, at least in the case of Apple Pay, is in the deployment of technology outside of its normal arena, such as at checkout terminals at stores, which takes time.

This is one of the major challenges of mobile market penetration of anything new.

There are exceptions, of course, such as entities like Uber and Lyft, which totally disrupt established industries and practices.

Mobile payments are likely to first take root in areas like public transportation and ticketing, where highly repetitive actions occur and people already are making payments on a regular basis and consumers are using the apps to check schedules, availability and pricing.

It’s always easier starting from an established base.

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