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How Starbucks is leveraging mobile to drive holiday foot traffic

Starbucks’ financial results from late last week disappointed analysts with only a 5 percent gain in same-store sales. According to coffee house chain’s executives, the results point the evolution in customer behavior away from physical retail, something that started even earlier this year than last year and which Starbucks is addressing with its Starbucks for Life promotion.

“And as a result of what happened last year and that is less people shopping with bricks-and-mortar stores and much more people shopping online on their mobile devices, as I talked about in my remarks, we began dramatically transforming the holiday season in anticipation of another holiday season that would even be more – greater than last year in terms of attrition of people shopping in physical stores,” said John Culver, group president for China and Asia Pacific as well as channel development and emerging brands at Starbucks, during a conference call with analysts to discuss the results.

“What we did see though and we did not expect is that we saw it come earlier than last year’s holiday season,” he said. “And so, we’re ready to go in terms of the fall and holiday season.

“Starbucks for Life is going to be a big holiday product and we believe is going to create incrementality in our stores.”

Starbucks for Life
Starbucks sees close 7 million transactions per week or 16 percent of all transactions conducted in Starbucks stores in the United States via a mobile device.

While the mobile application for the My Starbucks Rewards loyalty program is a key and growing part of driving sales for Starbucks, the chain, like many other merchants, is facing traffic issues as consumer behavior evolves toward a bigger focus on mobile-enabled ecommerce.

The downturn in traffic became apparent during the holiday season last year and, with this is mind, Starbucks has taken a number of steps to address the issue for the 2014 holiday season.

One element of the strategy is the five-week Starbucks for Life promotion.

Beginning Dec. 2, every Starbucks customer who uses a gift card or their My Starbucks Rewards account to pay will be eligible to win one of almost 500,000 food and beverage prizes

Additionally, 13 cardholders in North America will win the Starbucks for Life grand prize of free Starbucks for 30 years.

The program will be heavily promoted on social media.

Gift cards
Starbucks has also reimagined its gift card program with an eye toward addressing the downturn in traffic.

Last year, Starbucks had a record year for gift card sales as consumers shift towards giving gift cards instead of physical goods.

To further drive the trend this year, the chain is offering 100 new card designs and supporting sales on social media to encourage engagement and peer-to-peer sharing. The chain has greatly expanded its ecommerce merchandising for gift cards as well.

Another way that Starbucks will use mobile to drive in-store traffic includes the launch later this year of mobile ordering, which will be debuts in Portland in December and will roll out nationwide next year.

Starbucks continues to innovate mobile in other ways. In September, it revamped its Android app to include Shake to Pay functionality in the United States, Britain and Canada. In the U.S., it also introduced digital tipping and an integration with Uber for iOS users, enabling them to click on a ride to a nearby Starbucks.

“Our Starbucks for Life promotion and external marketing plans will ignite social media channels through our customers into our stores and drive significant loyalty into the flywheel of Starbucks,” said Howard Schultz, chairman, president and CEO of Starbucks, during the call with analysts.

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York