The delivery service, to be deployed in the second half of 2015, is the next frontier for Starbucks’ rapidly growing mobile ecosystem, which is tightly tied to the company’s loyalty program.
Seattle and New York’s Empire State Building will be the twin proving grounds for Starbucks’ latest bid to break down the barriers between people and their coffee: delivery.
The delivery service, to be tested in the two cities in the second half of 2015, is the next frontier for Starbucks’ rapidly growing mobile ecosystem, which is tightly tied to its loyalty program.
Starbucks says members of the rewards program buy more Starbucks goodies more often than the rest of its customers. People have to join the program to use Starbucks’ mobile payment app, which experts say is the most successful of its kind.
As of Tuesday, the app also allows ordering by smartphone or tablet all over the Pacific Northwest, enabling customers to skip the long lines that often form at the Starbucks counter.
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Wednesday’s delivery announcement coincided with the Starbucks shareholders meeting, an annual extravaganza held at McCaw Hall, at which executives reiterated the company’s ambitious target of nearly doubling revenue by 2019.
With Starbucks shares hovering near record highs, Wall Street seems to be buying the promise. But such breakneck growth can be hard for a mature company like Starbucks.
So in addition to opening 8,000 stores over the next five years — about 4.3 per day — the coffee giant will have to drum up new revenue through initiatives like mobile delivery.
At the meeting, Starbucks CEO Howard Schultz told shareholders the company planned the sixth 2-for-1 stock split in its history. Shares rallied to record highs after the announcement, closing at $95.84, up 1.5 percent.
Starbucks also said it struck a deal with Chinese food and beverage maker Tingyi Holding Corp. to manufacture and distribute ready-to-drink products in China, a market the company estimates at $6 billion.
In Seattle, Starbucks’ beverages and pastries will be delivered by Postmates, a San Francisco startup that specializes in on-demand delivery. Pretty much like Uber, Postmates relies on technology and part-time workers with their own bikes and cars to deliver food and merchandise.
Customers using the Starbucks app will be able to monitor their delivery’s progress. Starbucks chief digital officer Adam Brotman said the service is a logical extension of the mobile ordering and pickup feature that debuted in Seattle on Tuesday.
Postmates CEO Bastian Lehmann said there will be a fixed delivery fee, but the details are still being worked out. Right now Postmates delivery fees for other merchants start at $5 but can add up pretty quickly depending on the distance. There’s also an additional 9 percent fee applied to the purchase price.
Lehmann doesn’t foresee Seattle’s semi-permanent traffic gridlock to be a huge issue. With Starbucks locations everywhere, there will be very short distances between pickup and drop-off, he said. About 1,000 people in Seattle have signed up for Postmates’ delivery army, he said.
In super-dense New York, Starbucks will try a different approach, which it calls “green apron delivery.” That uses employees of a Starbucks inside an office building, delivering just within the building itself. The first test will take place in the Empire State Building.
The already busy store will have a separate area dedicated to preparing the orders for delivery “so we don’t slow down” the rest of the operation, Brotman said.
Brotman also said Starbucks will launch mobile ordering in Canada and a pilot test in the United Kingdom before the end of the year.
Starbucks released new numbers that show how its mobile initiative is having a growing impact on its brick-and-mortar empire.
Starbucks processes about 8 million weekly mobile-payment transactions, representing more than 18 percent of the revenue collected at its U.S. stores, Brotman said. The last time the company gave out a number it was 16 percent.