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How do you explain the popularity of the Starbucks mobile app? The fact that it rivals Apple Pay in usage is proof that the answer is no.

by tempsy 7y ago

novok 7y ago
But people don't use it more than a special gift card and loyalty program although, and it seem that starbucks does not have ambitions to be a general wallet. I'm guessing why starbucks promoted it heavily is to reduce card fees eating into their margins and all the other typical loyalty and gift card reasons. I'm not seeing rumblings anything close to something like grab pay coming from starbucks for example.
- rossdavidh 7y ago
  Exactly. The typical purchase size at Starbucks is small enough that the CC fees (which are something like 3%, but also have a minimum per-transaction cost which is something like $0.25) are problematic. If all that Starbucks gets out of it is that those people who use their wallet are paying about $0.20 more to Starbucks (and not the CC company) per purchase, that already is a win for them. Plus, many Starbucks customers go there 5 days a week, so it is easier to get a one-place payment method used. For other places, where one shops once a week or once a month, it would be harder to get people into the habit of using their special payment method for just them.
  - tempsy 7y ago
    In urban cities like SF people use Uber just as frequently. It isn't a once a week or once a month purchase. Point is Uber shares a lot of the same purchasing behavior as a Starbucks customer (low dollar, high frequency) and would stand to benefit from a similar wallet app. I believe Uber is also working with some cities to be the app to buy public transit tickets from, so there is some path forward to using an Uber wallet to buy other things. And again, as I pointed out in my original comment, Starbucks is not just saving per coffee transaction fees - they are monetizing $1.6 billion worth of balances. They even consider "old" balances that haven't been touched in a long time an asset vs liability (e.g. forgotten gift cards become free money).

How do you explain the popularity of the Starbucks mobile app? The fact that it rivals Apple Pay in usage is proof that the answer is no.

by tempsy 7y ago

How do you explain the popularity of the Starbucks mobile app? The fact that it rivals Apple Pay in usage is proof that the answer is no.

novok 7y ago

But people don't use it more than a special gift card and loyalty program although, and it seem that starbucks does not have ambitions to be a general wallet. I'm guessing why starbucks promoted it heavily is to reduce card fees eating into their margins and all the other typical loyalty and gift card reasons. I'm not seeing rumblings anything close to something like grab pay coming from starbucks for example.

rossdavidh 7y ago
Exactly. The typical purchase size at Starbucks is small enough that the CC fees (which are something like 3%, but also have a minimum per-transaction cost which is something like $0.25) are problematic. If all that Starbucks gets out of it is that those people who use their wallet are paying about $0.20 more to Starbucks (and not the CC company) per purchase, that already is a win for them. Plus, many Starbucks customers go there 5 days a week, so it is easier to get a one-place payment method used. For other places, where one shops once a week or once a month, it would be harder to get people into the habit of using their special payment method for just them.
- tempsy 7y ago
  In urban cities like SF people use Uber just as frequently. It isn't a once a week or once a month purchase. Point is Uber shares a lot of the same purchasing behavior as a Starbucks customer (low dollar, high frequency) and would stand to benefit from a similar wallet app. I believe Uber is also working with some cities to be the app to buy public transit tickets from, so there is some path forward to using an Uber wallet to buy other things. And again, as I pointed out in my original comment, Starbucks is not just saving per coffee transaction fees - they are monetizing $1.6 billion worth of balances. They even consider "old" balances that haven't been touched in a long time an asset vs liability (e.g. forgotten gift cards become free money).