Starbucks Chief Exits Square’s Board; Coffee Giant Tests Digital Gratuity Feature (Oct. 31, 2013)
Starbucks, arguably the largest mobile payments operator in the world with its wildly popular closed-loop mobile app, grabbed attention late Wednesday with news that Starbucks CEO Howard Schultz has resigned from Square Inc.’s board after 15 months. Schultz intended to serve for just one year on Square’s board, a Starbucks spokesperson tells Paybefore. David Viniar, most recently CFO of Goldman Sachs Group Inc., will take his place, Square said.
Schultz made waves when he announced he was joining Square’s board in August 2012, as Starbucks poured $25 million into Square, forging a new partnership calling for Square to begin processing all credit and debit transactions at Starbucks’ 7,000 U.S. stores. Starbucks began accepting Square at the POS in November last year, enabling customers to pay with a mobile device using a credit or debit card. Square setup kits this year appeared sporadically at Starbucks checkout counters nationwide.
But Starbucks’ closed-loop mobile app remains its digital juggernaut. The mobile app accounts for 11 percent of all U.S. and Canada sales, company execs said Oct. 30 during a conference call to discuss quarterly earnings with net revenue up 13 percent to $3.8 billion from the same quarter a year ago. “Perhaps no single competency is enabling us to elevate and amplify the Starbucks brand [more than our global leadership position in] mobile, digital and loyalty,” Schultz said.
Next up: Starbucks is testing a new feature enabling mobile app users to add a gratuity to digital purchases, a Starbucks spokeswoman confirms. The feature would enable baristas who pool their daily tips to recapture those funds when customers stop paying with cash, observers say. “We’re excited about [the digital gratuity feature], but we’re still tweaking it,” the spokesperson added without disclosing a rollout date.
The fact that Starbucks still hasn’t implemented a digital gratuity tool as its mobile app’s share of transactions rises may point to the difficulty of implementing such a feature, including accurately routing and tracking tips to the right store and personnel, James Wester, IDC Financial Insight research director, tells Paybefore. “The issues are nothing that can’t be solved, but it’s certainly not as simple as dropping change in a jar,” he notes.