Starbucks Corporation SBUX began the food and beverage delivery service in collaboration with on-demand delivery service, Postmates, in Seattle on Wednesday. The partnership was announced earlier this year.
The service can be availed by customers in select areas of Seattle — downtown Seattle, South Lake Union, Capitol Hill, Madison Park and the Sodo area. Orders can be placed through Starbucks’ mobile app, using the “Mobile Order and Pay” feature, and will be delivered by Postmates courier. The service is, for now, available only for iOS users.
Under this pilot program, customers are being given a one-hour delivery window, though per Starbucks most orders will be delivered in less than half an hour. However, reportedly, with $5.99 delivery fee and a tip, the service isn’t cheap.
The coffee chain began its delivery service (through its employees) for the first time in October but only in New York City’s Empire State Building. Starbucks charges a flat $2 delivery fee for this service.
The delivery service through its mobile app is one of the many technological innovations introduced by Starbucks to strengthen its brand, improve efficiency and in-store execution while increasing profitability.
Retail companies are witnessing a shift in consumer shopping behavior away from brick-and-mortar stores toward online shopping. Customers are consuming more food/ beverages away from home and using mobile phones for most online activities. Starbucks has secured a leading position in leveraging its mobile and digital assets, My Starbucks Reward (MSR) loyalty program and e-Commerce platforms to capitalize on these trends and create more revenue streams.
The Mobile Order & Pay service was launched last year which is now available in all U.S. company-operated outlets — more than 7,400 locations. This initiative allows customers to order before arriving at a Starbucks café and pick up the items at their selected Starbucks store, thus saving time. The service has been well accepted and is expected to soon boost MSR membership and app usage while increasing transactions. Starbucks has started to deploy the facility in 150 stores in the U.K. and more than 300 stores in Canada and plans to continue rolling out the platform in key international markets.
To expand its loyalty program, Starbucks formed strategic loyalty partnerships with Lyft, Spotify and The New York Times to allow MSR members to earn stars through purchases made with these third parties; thereby generating an additional revenue source.
These initiatives are expected to quicken service, increase convenience and enhance customer loyalty thereby driving mobile payment transactions and spurring traffic.
Stocks to Consider
Starbucks has a Zacks Rank #3 (Hold). Investors interested in the restaurant sector may consider stocks like BJ's Restaurants, Inc. BJRI, Carrols Restaurant Group, Inc. TAST and Jack in the Box Inc. JACK. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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