CFO Scott Maw says digital relationships are key to increasing frequency, sales
Following a disappointing holiday season, Starbucks announced plans to streamline mobile ordering and provide easier access to its in-store Wi-Fi — initiatives expected to drive frequency and sales, CFO Scott Maw told investors Thursday.
Of the 75 million customers that come into stores each month, about 15 million are active Starbucks Rewards members.
Since “virtually all of our comp growth is being driven by digital relationships,” Maw said Starbucks is missing an opportunity to grow sales among 60,000 customers who don’t want to bother with the rewards program. The loyalty card requires customers to register as members before they can order and pay.
The Seattle-based company’s Mobile Order and Pay program is expected to roll out to anyone who downloads the app by the end of the year. No registration required.
Easier access to the store’s free Wi-Fi is another digital initiative, Maw told investors and analysts at the UBS Global Consumer and Retail Conference.
Maw said soon the Seattle-based chain will ask for your email to connect to a store’s free network. Customers will only enter their email once. Afterward, access will be automatic, with no requirement to accept any terms and conditions through a browser.
“We're going to make it easy for you,” Maw said.
Adding emails allows the coffee giant to establish digital relationships with customers — a key to capturing data and sending promotions to customers to drive foot traffic. The goal is to have several million non-Starbucks Rewards digital relationships by the end of this year, he said.
“If we can get those customers into that personalization engine, we will drive comps,” Maw said.
Maw’s announcement comes as Starbucks launches other initiatives to drive sales amid a sector where regional chains and upscale specialty coffee houses are popping up around the country. Those cafes are popular among the so-called “letter” generation — Gen Y and Z. Those younger diners are looking for unique experiences and personalization in the brands they patronize.
This month, the chain opened a Visitor Center at Hacienda Alsacia, the company’s 600-acre coffee farm in Costa Rica. In February, Starbucks opened in Seattle its first Reserve store, a new premium store format. The store features reserve coffees and exclusive new beverages such as nitro draft lattes, spiced ginger cold brews and a Bianco Mocha drink. The store also serves a menu by Princi, a Milanese institution known for its wood-fired breads and pizzas.
Starbucks said it plans to open 1,000 or more Reserve stores globally over time. In addition, the company plans to open standalone Princi stores in Seattle, New York and Chicago. Later this year, Roasteries will open in Milan and New York, with others coming to Tokyo and Chicago in 2019.
In January, Starbucks reported a 2 percent increase in same-store sales in the first quarter ended Dec. 31, 2017. Sales were dragged down by disappointing holiday sales starting in mid-November. Specifically, mall shoppers were not drawn to the brand over the holidays.
Starbucks said the performance of units located in malls, comprising 6 percent of total locations, was several points below non-mall units.
For the first quarter ended Dec. 31, 2017, Starbucks Corp. reported a 5.9 percent increase in net revenue to 6.1 billion. The company reported quarterly profit of $2.3 billion, up from $752 million for the same period a year ago.
The company’s loyalty program, Starbucks Rewards, has been a bright spot. In the U.S., it grew by 11 percent, representing 37 percent of sales at company-operated locations. Eleven percent of sales at those locations came from mobile order and pay, underscoring the chain’s announcement this week to make digital ordering easier for customers.
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