Technology Is Changing Coffee Habits...Quickly - Barron's

When it comes to mobile payments Starbuckshas succeeded where Silicon Valley has generally struggled. But the coffee giant’s advance-ordering process via smartphones hasn’t always run smoothly. Earlier this year, the company admitted that it was getting so many advance orders that the whole process was hurting the in-store experience for those who wanted to wait on line and buy their drinks the old-fashioned way.

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Months later, the company seems to be working out the kinks, with a dedicated person in each store keeping tabs on mobile orders as they come in. “Total turnaway rates and in-store wait times are declining, indicating improving satisfaction,” writes Mizuho analyst Jeremy Scott, who surveyed some New York locations.

Adoption of the mobile-order platform “is still in the fast lane,” he adds, with his checks suggesting that almost 30% of New York City transactions are made in advance. That’s up from 25% in June and 17% a year ago. Nationally, Starbucks has said that 9% of total orders were placed in advance in the most recent quarter.

Mobile ordering is important to Starbucks, and to similar establishments, because it can help build loyalty. Starbucks’ rewards members accounted for 18% of the customer base but 36% of sales in the latest quarter, as the program incentivizes repeat orders and keeps the chain front of mind, on a user’s phone.

Scott thinks mobile orders are a big reason why Starbucks shares could rise more than 35%, to $75.

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