Starbucks reaches a new milestone: 30% of payments are mobile

Starbucks has hit a mobile payments milestone, with 30% of all U.S. transactions now coming through mobile, and to smooth operations surrounding its popular Mobile Order & Pay service, the company is introducing digital-ordering specialists at its busiest stores.

Starbucks' sales hit snags early this year from issues with its mobile-ordering system, after which the company placed a Digital Order Manager at 1,000 stores with plans to expand that program, Starbucks executives told analysts during a conference on Thursday announcing results for the fiscal quarter ended July 2, 2017.

Victor J. Blue/Bloomberg

Thirty percent of U.S. Starbucks customers now pay through the mobile channel, up from 29% during the previous quarter and 25% a year ago, Starbucks said.

Mobile Order & Pay now accounts for 9% of all U.S. transactions, up from 8% during the previous quarter and 5% a year earlier, and the service is growing “increasing rapidly,” Starbucks CEO Kevin Johnson told analysts.

Membership in the My Starbucks Rewards program increased 8% during the second quarter to reach 13.3 million U.S. consumers, but as the growth rate appears to be slowing, Starbucks is now looking for ways to expand sales outside of its rewards program.

Beginning later this year, Starbucks plans to end the requirement that customers be members of its loyalty program to order ahead. Early next year Starbucks will also begin testing a guest checkout program for online orders.

Starbucks also is shifting to a cloud-based platform to support its rewards program, enabling more flexibility, including the ability to give special rewards to subsets of customers, said Matt Ryan, Starbucks’ executive vice president and global strategy officer, during the call.

For example, customers who sign up for the co-branded prepaid card Starbucks has promised to launch with JPMorgan Chase & Co. will receive unique benefits, Ryan said.

“By broadening the digital flywheel beyond the narrow aperture of people with stored value cards and rewards now, we see large long-term opportunities for growth by creating more digital relationships,” Ryan said.

Starbucks also announced it’s closing all 379 of its Teavana stores in the U.S. and shifting more of its attention to China, where its sales of tea and coffee show strong growth. Starbucks has had success in China with social gifting, which it introduced this year through a partnership with Tencent for its WeChat app. In the first six months, the program drove 2 million Starbucks social gift transactions, Starbucks said.

“We do not have social gifting at that level here in the U.S., but clearly we’ve got a sightline on what that could be in the U.S,” Howard Schultz, Starbucks’ executive chairman, told analysts.

Starbucks' revenue for the second quarter reached $5.66 billion, up 8% from a year earlier.