Starbucks was once considered the go-to “third place” where people could relax, work, and socialize over a cup of coffee. However, the rise of mobile ordering has compromised the company’s core identity, our analysts said. In North America, Starbucks saw a 6% drop in foot traffic, and a 2% decline in same-store sales YoY, according to its July earnings call.
To address these challenges, Starbucks hired Brian Niccol, the former CEO of Chipotle, known for successfully integrating mobile orders at the fast-casual chain.
Starbucks’ identity was built on more than just coffee; it was about the experience. “The original intention [of Starbucks] was to just hang out there and to get your work done and meet friends for coffee,” our analyst Suzy Davidkhanian said during a recent edition of our “Behind the Numbers: Reimagining Retail” podcast.
That personal touch—knowing your barista, handwritten names on cups, and the local coffeehouse vibe—was part of Starbucks’ appeal. But mobile order has unintentionally transformed the experience into a quick, impersonal transaction with customers rushing in and out with little interaction.
Proximity mobile payment transaction value is expected to grow by 21.4% in the US this year, with Starbucks’ app ranking as the second most-used proximity payment platform, according to EMARKETER’s forecast.
Yet, the surge in mobile orders has also led to operational challenges. “Starbucks has been facing a lot of challenges with bottlenecks through its mobile ordering system because it allows so many customizations that then complicate the ability to complete those orders,” said our analyst Sky Canaves. These delays are frustrating customers who want convenience and expect service that’s as seamless as the mobile experience.
While Starbucks has struggled recently, Chipotle has done well under Niccol’s leadership, particularly in mobile order integration. The fast-casual chain introduced a second assembly line dedicated to mobile orders, ensuring quick service for both in-store and mobile customers.
The bottom line: While mobile ordering has brought speed and accessibility, it has also diluted Starbucks’ in-store experience. As the company moves forward with Niccol at the helm, it must strike a balance between operational efficiency and preserving its brand to maintain its status as a premium brand in an increasingly commoditized market.
Listen to the full episode of “Behind the Numbers: Reimagining Retail” to learn more about the state of Starbucks and the implications for retail at large.
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