Starbucks places a downpayment on a Blockchain vision

SUMMARY:

Starbucks took a long term bet on digital a long time ago. Now attention is turning to the future of payment tech, including securing a role as a trust legitimiser for Blockchain.

Mobile payments in Starbucks US business now accounts for fast approaching a third of total tender. This is hugely significant, argues CEO Kevin Johnson, and leads in turn to exploration of new payment models and methods:

The ubiquity of mobile and credit card payment is enabling us to begin an exploration of cashless stores in the US. We expect payment methods will continue to evolve with acceptance increasingly becoming the global currency of the future.

Building on partnerships with companies like Chase, Tencent, Alibaba and others, enables us to explore new ideas that leverage our digital assets, global retail footprint and global customer base with the digital payment platforms of today, while also monitoring the landscape of potential payment platforms of the future.

Through our Rewards program, we continue to drive increases in per member spend by leveraging personalized offerings and suggested selling to our customers.

By expanding capacity at peak, we have now the ability to offer Mobile Order and Pay to our non-Rewards customers and will begin accelerating the ramp up of Mobile Order and Pay to all customers beginning in March. We are accelerating our marketing engagement to expand digital customer relationships.

Next month Starbucks will launch a co-branded credit card in partnership with Chase and Visa. Users of this card will be able to earn Star reward points at “an accelerated rate at Starbucks” as well as in other retail outlets.

That’s going to be followed up in April with a co-branded – again with Chase and Visa – store value card. This will be pitched at customers who don’t want, or who don’t quality for, credit cards.

Long term thinking

All of this is the continuation of a long term strategy, insists Starbucks Chairman Howard Schultz, the driving force behind the company’s early adoption of disruptive tech:

One of the real benefits of what we’ve been able to accomplish as a company has been the entrepreneurial DNA of Starbucks and constantly having the curiosity to see around corners and make big bets. And I think there’s probably no better example of that than over the last five six years what we’ve been able to do around digital mobile payment.

Arguing that 20 years ago nobody had a clear idea about the transformative potential of the internet, Schultz said there are new questions to be asked today:

The question is the issue of do you understand and are you anticipating what could happen with crypto-currencies? And the reason I mention this is not because I’m talking about Bitcoin, because I don’t believe that Bitcoin is going to be a currency today or in the future. I’m talking about the new technology of Blockchain and the possibility of what could happen not in the near-term, but in a few years from now with a consumer application in which is trust and legitimacy with regard to a digital currency.

I’m not bringing this up because Starbucks is announcing that we are forming a digital currency or we’re investing in this. I’m bringing this up, because as we think about the future of our company and the future of consumer behavior, I personally believe that there is going to be one, or a few, legitimate trusted digital currencies off of the Blockchain technology.

This is where Starbucks can play a part, he suggested, stating that legitimacy and trust in terms of consumer applications will have to be legitimatized by a brand and a brick and mortar environment, where the consumer has trust and confidence in the company that is providing the transaction:

You have to ask yourself, well, if that’s the case, if you believe that that proposition is possible, how many companies or what company has the national or global footprint as well as the digital mobile payment trust and confidence integrated into its existing business? And if you take it a step further, and you believe this is coming, given the fact that there are hundreds of millions of dollars domestically and globally being invested in this technology, in which there is an arms race as to who is going to win.

There’s going to be lot of winners, a lot of losers. But we are in a very unique position to take advantage of what other tech companies and the Blockchain technology will provide in terms of the rails to potentially be in the mix of this and benefit financially, benefit in terms of consumer behavior and incrementality and significantly create long-term shareholder value.

I believe that we are heading into a new age, in which Blockchain technology is going to provide a significant level of a digital currency that is going to have a consumer application. And I believe that Starbucks is in a unique position to take advantage of that…We think we have something to offer the companies that are chasing this, because we are in a position to create the trusted legitimate place in which this could be accepted and possibly take advantage of the mobile payment digital platform that we have created.

My take

Schultz had a digital vision long before most of Starbucks contemporaries and the firm has exploited that (on the whole) successfully ever since.  Setting out Blockchain ambitions is a logical next step and one that, if handled with care, could provide the next ‘first mover’ advantage for the coffee giant.

Image credit - Starbucks

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