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Starbucks inches in on 5M mobile weekly transactions

Starbucks continues to see an uptick in consumers using their mobile devices to pay for food and drinks with 10 million active application users, the company revealed during its first-quarter 2014 results.

During Starbucks’ first-quarter 2014 results, Howard Schultz, CEO of Starbucks, Seattle, chocked up a strong holiday season to the company’s innovations that blend digital and bricks-and-mortar marketing together. In particular, mobile helped the retailer turn first-time gift card receivers into loyalty members during the holidays.

“Holiday 2013 was the first in which many traditional bricks-and-mortar retailers experienced in-store foot traffic give way to online shopping in a major way,” Mr. Schultz during the company’s first-quarter 2014 earnings call last week.

“Customers research, compare prices and then bought the brands and items they wanted online, frequently using a mobile device to do so,” he said.

Fueling up on mobile
Mr. Schultz also revealed during the earnings call that Starbucks has amassed ten million active mobile users of its loyalty and payment app. The majority of these users – 7.3 million – reside in the United States.

Additionally, half of all of Starbucks’ mobile users are gold status members, meaning that consumers make 30 purchases linked to a My Starbucks Rewards loyalty account in one year.

In exchange for the 30 purchases, loyalty members unlock a free drink or food item for every 12 purchases and also have access to exclusive offers.

The combination of mobile and Starbucks card payments now represent 30 percent of total payments in the U.S.

Mobile-specific payments were not broken out in Starbucks’ Q1 results, but in April 2013, the medium represented 10 percent of U.S. revenue (see story).

During the first-quarter of 2014, Starbucks processed more than 40 million new Starbucks cards, representing $610 million in the United States and Canada.

In the days leading up to Christmas, the brand saw more than two million new Starbucks card activations per day. These numbers likely correlate to consumers buying Starbucks gift cards for the holidays.

The importance piece of the new Starbucks cards is that Starbucks says that the recipients of these cards tend to be new customers at Starbucks, giving the company a chance to convert them to loyalty members.

Starbucks generated a quarterly revenue of $4.2 billion and a quarterly operating income of $814 million.

Starbucks’ mobile app

Mobile java
Starbucks’ results follow several innovative mobile and social campaigns that the coffee giant put into place towards the end of 2013.

In October, Starbucks was one of the first brands to run a mobile commerce campaign with Twitter called “Tweet-a-Coffee”. Consumers can tweet a hashtag that is linked to a credit card to send a gift card to friends and family member that is then redeemed via the Starbucks mobile app (see story).

Additionally, Starbucks partnered with tea brand Teavana to help scale its My Starbucks Reward program to offer consumers rewards for using their mobile devices to pay for items (see story).

The brand is highly regarded as a leader in mobile payments with a reloadale gift card that streamlines mobile payments for consumers.

However, the focus on a streamlined payment process also may have forced the retailer to sacrifice some data protection, leaving the iOS app passwords and location open for hackers (see story).

After a security researcher discovered the privacy holes in Starbucks’ app recently, the company updated its mobile app.

Starbucks was also one of the first marketers to leverage Apple’s Passbook in 2012.

“While loyalty integration is important, it goes beyond just loyalty functionality in the app,” said Alex Campbell, chief innovation officer of Vibes, Chicago.

Mr. Campbell is not affiliated with Starbucks. He spoke based on his expertise on the subject.

“Because customers can easily pay using their phone, and they know they’ll get loyalty credit, they’re more likely to come back each day,” he said. “Every morning, I make a decision about where to get coffee, and because I have the Starbucks app on my phone, I know I’m going to get loyalty credit when I buy my coffee at Starbucks.

“This influences the decision process and makes choosing Starbucks even easier.”

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York