Behind the Money

The Unlikely Mobile-Commerce Winner (Hint: Think Coffee)


Mobile transactions via smartphone for this company have doubled in pace and have topped 26 million since its app was launched in January.

This company is not Google, eBay’s PayPal, Visa or MasterCard.

It’s the latte pusher Starbucks.

Over the last nine weeks, Starbucks customers used their mobile device for six million transactions, up from three million transactions in the first nine weeks of the program, according to a company press release.

The app stores Starbucks gift cards that can be refilled automatically via a credit card. To complete a transaction, you hold your phone face up to the barista’s bar code reader and then you’re on your way.

“Starbucks is really the first brick to web crossover brand that embraces the mobile web,” said Howard Lindzon, a venture capitalist and co-founder of the investing social network . “The benefits will be enormous as they crush small independents again with the iPhone being the way people need and want to pay for their drugs (caffeine included).”

Starbucks has achieved first what others have not because of its more sophisticated customer base and the ease of its mobile app, people said. And while it’s very small amounts, customers seem to trust the established brand with storing their card information.

“It’s awesome and exactly what an app should be: easy convenient, and occasionally delightfully surprising,” said Barry Ritholtz, investor and author of the popular blog.

“My wallet is buried away in my coat pocket, but the cell phone is always in hand (Twitter, email, calls) or in an easily accessible pocket,” he said.

The mobile app also includes a store locator and an updated “Starbucks Rewards” status, where frequent users can earn free drinks.

The mobile-payment wars will really begin to heat up next year. Google launched its “Wallet” product this May and cellphone carriers are jockeying to get in on the act.

“The trend toward using smart phone technology in assisting us in daily activities is growing stronger and will spread quickly away from just buying coffee,” said Jim Iuorio, a managing director with TJM Institutional Services. “Apple , Google and various chip makers will continue to benefit from the shift. Of course, Starbucks will benefit, but not disproportionately to any other similar retailer.”


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