Restaurants

Starbucks unveils new ways for loyalty program members to pay as coronavirus weighs on sales

Key Points
  • Starbucks loyalty program members will be able to earn points using more methods of payment, starting this fall.
  • Paying with cash, credit or debit cards, mobile wallets or PayPal will fewer points per dollar spent, however.
  • The company is trying to recruit more loyalty members to help drive sales.

Starbucks on Tuesday announced that loyalty program members will have more ways to pay for their drinks as the coffee chain pushes to recruit more enthusiastic customers.

Since its inception, Starbucks Rewards has only accepted preloaded gift cards as payment. Starting this fall, customers can link their credit or debit cards or PayPal accounts to pay within the app. And if they prefer to pay in person, they will be able to also use cash, credit or debit cards or select mobile wallets and still earn points.

The company last revamped its loyalty program in 2019, adding more redemption options and getting rid of the two-tiered system to motivate customers to return to its cafes. As the coronavirus pandemic and related store closures weigh on Starbucks' U.S. business, loyalty members can help return sales to their prior levels. Starbucks said in June that it expects U.S. same-store sales to fall by 10% to 20% in fiscal 2020

The changes were unveiled as many restaurants and retailers assess the best ways to drive contact-free payment to reduce the risk of spreading the coronavirus. Mastercard reported a 40% increase in contactless payments, like tap-to-pay and mobile pay, during the first quarter.

Starbucks, long seen as a leader in restaurant technology, has reported an increase in revenue from its loyalty program members during the pandemic. In the United States, 48% of sales in the last week of May came from Starbucks Rewards members, up from 44% in the quarter ended March 29, according to a regulatory filing. The program had 19.4 million active U.S. members, as of March 29. 

Starbucks Chief Marketing Officer Brady Brewer said in an interview that the pandemic didn't drive the company to accelerate the launch, but it did mean a lot more effort to stay on track with its original timeline.

"This has been a top request for customers for a long time," Brewer said. "Under these conditions, it's just even more relevant." 

The new ways to pay will generate points — or stars, as the company calls them — at a slower rate than a Starbucks gift card. For every dollar spent through a preloaded card, loyalty members earn two stars. Paying with cash, credit or debit cards, mobile wallets or PayPal will generate just one star per dollar spent. Starbucks spokeswoman Erin Shane Riley said the difference in rates acknowledges that customers who preload a Starbucks card take an extra step.

Shares of Starbucks have fallen 15% so far in 2020. The company has a market value of $87.2 billion.

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