What went wrong with Starbucks’s mobile ordering strategy

While Starbucks used to be one of the leaders in mobile app ordering, the company is struggling to maintain momentum. In April, Starbucks’s then-CEO Laxman Narasimhan told investors that a large number of potential customers — in the “mid-teens percent” — used the Starbucks app to start an order but then didn’t check out. In June, Starbucks founder Howard Schultz went on the podcast “Acquired” and called the mobile pick-up area “a mosh pit.”

“That’s not Starbucks,” he said.

Retail consultants and analysts told Modern Retail, however, that today’s Starbucks could be considered a mosh pit — at least compared to years past. Employees are overwhelmed with the onslaught of in-person and digital orders, many of which register in Starbucks’s system at the same time. Orders are coming in quickly, but there aren’t enough baristas behind the counter to prepare drinks. Wait times are climbing; according to data provider Technomic, about 8% of Starbucks customers waited between 15 and 30 minutes for a drink in the second quarter, compared to “virtually no one” waiting that long during the same period in 2019. And, Starbucks now has more than 170,000 possible drink combinations, making everything more complicated.

It’s a hectic environment for a company that once called itself “the third place,” a sociological term meaning a location that isn’t work or home but a comforting third option. In the past, customers used to camp out at Starbucks to read, check their email or chat with friends. Now, more than 70% of Starbucks’s sales come from its mobile app and drive-thru.

In other words, “the app is the third place,” Barry Thomas, senior global thought leader at Kantar, told Modern Retail.

Starbucks’s mobile app was once core to the company’s growth plan. Only three years ago, Starbucks was the second most-used mobile payment app in the U.S., right after Apple Pay, per eMarketer. Back then, the world was still in the throes of the pandemic, and like other food and beverage companies, Starbucks had to adapt. It invested more in curbside pickup and drive-thru and increased its Uber Eats delivery windows. Out of necessity, Starbucks focused more on convenience. In doing so, it placed less emphasis on its in-person experience.

Now, people worldwide are back to buying drinks in stores and online. But if Starbucks’s app isn’t making it easy for customers to grab their coffee or tea, it’s creating more problems than solutions, sources say. And there are plenty of other competitors — like Dunkin’ or Dutch Bros — that are finding success with mobile ordering and would be happy to take Starbucks’s customers. In fact, mobile ordering has become the norm for many quick-service restaurants. According to the restaurant SaaS company Delaget, mobile app sales at QSRs are up 57.2% year over year. QSRs that can’t keep up with the demand risk losing revenue and customers.

Starbucks has admitted to having issues with its app. In July, Narasimhan — who joined Starbucks as interim CEO in 2022, then full-time CEO in 2023 — said Starbucks had fixed its algorithm for mobile order ETAs. Some previous estimates were inaccurate, Starbucks said, but now, the new algorithm has “improved order-ready accuracy by nearly 50 percentage points,” Narasimhan said. What’s more, Starbucks expanded its mobile pay capabilities to include customers who don’t belong to its rewards program. Starbucks saw a 10% year-over-year rise in Mobile Order & Pay revenue during its most recent quarter.

Sources say those changes are a good start. But in focusing on speed and accuracy, Starbucks can’t afford to ignore the “human element,” Kantar’s Thomas said. Starbucks drinks can add up to $6 or $7, but the premium price point isn’t reflected in the experience, he said. “You’re just a commodity,” he explained. “They have got to get back to the voice of the guest. The voice of the guest seems to be missing.”

Rebekah Kondrat, a retail analyst and founder of the retail consultancy Rekon Retail, worked at Starbucks from 2004 to 2009, first as a barista and later as a supervisor and manager. Back then, she said, Kondrat would go down the line taking customers’ orders and writing them on the sides of cups. By the time customers got to the front of the line, their orders would be ready. “It very much centered around the customer experience,” she told Modern Retail. “I knew the regulars by name.”

Starbucks began letting customers pay by mobile in 2011, two years after Kondrat left her position. In 2015, it started letting customers order ahead of time using the app. Those customers could then pick up their orders when they got to the store.

Now, Starbucks has two lines for ordering. There’s the line of people physically in the store or drive-thru, and then there’s the line of people who have ordered ahead of time via the app. The second line is essentially invisible, which can be overwhelming for baristas because lines serve as “visual cues” that tell workers to “up their game,” Kondrat said. “It’s become a really interesting phenomenon where you have to adapt and adjust,” she added. Beyond this, the two lines can be confusing for customers who don’t know where they fall in the queue.

Starbucks has tested out different strategies to handle the influx of mobile orders. In 2019, for example, it piloted pickup-only locations, which it then ramped up during the pandemic.

Even with these changes, Starbucks’s mobile growth has come at the price of its beloved customer experience. Kantar’s Thomas recommended trying out a different pricing strategy, one that involves higher price points for in-person orders and lower price points for drive-thru or mobile orders. “That may sound radical, but these are the things Starbucks needs to be thinking about in research,” he said.

Niccol, the new CEO, said he has spent the past few weeks doing research. He wrote in Tuesday’s letter that “Starbucks is a beloved brand with wonderful people,” but also said that “there’s a shared sense that we have drifted from our core.”

“I’m making a commitment: We’re getting back to Starbucks,” he wrote.

But the way for Starbucks may actually be forward, not back, sources said. “It’s almost like they need to whiteboard a new concept,” Thomas explained. “Yes, it’s still Starbucks, and the imagery and the creative is still the same, but what does that Gen Z/millennial consumer want from Starbucks?”