How mobile payments and IoT can save Starbucks $1 Million per day

By on July 16, 2013
Starbucks Internet Of Things

Starbucks recently announced (June, 2013) that about 10% of transactions occur using a mobile device.  Starbucks processes approximately 4 million transactions per week.  This is double compared to the 2 million transactions per week at the end of 2012.

Your iPhone or Android device is the quintessential internet of thing, because it is ubiquitous and the device can act as a “hub” for all of your other connected devices.  It is also a virtual cash register, possessing the ability to conduct mobile payments.

The usage of a mobile device for payments has staggering implications for Starbucks 1) productivity and 2) big data.

Productivity:  Paying with your iPhone makes things so much faster for Starbucks

Let’s do a back-of-the-envelope calculation on how much Starbucks might save when its entire customer base utilizes mobile payments.

With the following assumptions we can calculate how many seconds might be saved for Starbucks at point of sale:

Time saved when mobile payments are used:

  • 10 seconds saved mobile versus a credit card
  • 20 seconds saved mobile versus cash (we’ll focus on this for now)

Now, combining this data with total locations and visitor data

  •  21000 stores
  • 500 customers per day (estimate, various sources),
  • That’s 10.5 million transactions per day  for all of Starbucks (assuming one transaction per customer per day)

Versus cash, Starbucks would save 210 MILLION seconds or 58,333 hours by processing mobile payments.

At $10 an hour, that’s $583,333 in savings per day if they were able to realize this efficiency in labor.

Even more savings:  Customers ordering directly on their phones

Currently, customers cannot order on their phones.  If Starbucks implements the ability for customers to actually order drinks on their phones, they become even more efficient.  Let’s assume Starbucks would save another 20 seconds per transaction, or another $583,333.

The bottom line

So, in total, with mobile payments and order processing, Starbucks can (back of the envelope) save a grand total of $1.16 Million per day.

At 365 days, that’s $426 Million per year.

Of course, these tactics would likely not yield Starbucks full cost savings, but would rather free up more employee time for value-added services and increased capacity.

More connected devices and internet of things

Certainly Starbucks can increase productivity even further by implementing additional connected devices.  For example:

  • Coffee can automatically be dispensed directly to customers
  • Employees can be alerted when consumables (napkins, supplies, etc) have run out
  • Temperature can automatically be controlled based on time of day, number of in-store customers
  • Customers can order their drink before arriving at the store, based on pre-set business rules or push notifications

So could this be the end of waiting in line for a complicated-soy-lowfat-skinny-half-caff drink when all you want is a tall cup of coffee?

Next up, we’ll look at the relationship between big data and mobile payments at Starbucks.  Stay tuned.

In the meantime, let us know your thoughts at info(at)complemedia.com or in the comments section below.

 

About admin

2 Comments

  1. Isaac Sacolick

    July 19, 2013 at 2:35 am

    How about feedback of wait times of nearby stores to consumers and abandonment rates back to Starbucks. With all the automation and intelligence, Bucks hasn’t figured out how to minimize wait times.

    But nice post and interesting math.

    • admin

      July 19, 2013 at 2:42 am

      Agreed. Wait times are not long. One complicated order ends up costing everyone. And definitely there is abandonment. automation may even increase transaction sizes if there is less time spent waiting.

Leave a Reply

Your email address will not be published. Required fields are marked *


8 − = two

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>