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TheStreet Open House

Tech, Small Business Can Learn Plenty from Starbucks

Stocks in this article: SBUXLULUAAPL





I'm the customer they were going after with their best-in-breed mobile app. Download it. Play with it. Interface with people on the team who conceived it. You'll see what I mean when I call Starbucks a tech company. Hitting home with an urban-located or at least urban-minded, mobile-and-digital comfortable crowd drives these numbers we heard on the call. I guarantee it:

Our Starbucks card is more popular than ever today, accounting for 25% of U.S. tender, and an increasing portion of Starbucks card transactions and sales are being paid by using our mobile payment apps, with mobile payments now accounting for nearly 20% of overall card transactions. Over 7 million customers now use one of our mobile payment apps, translating into 2.1 million mobile payment transactions each week, with hundreds of thousands of additional Starbucks mobile app downloads each week (bold emphasis added).
Our Starbucks card had its best holiday season in history, as measured by any metric, with more than $1 billion loaded during Q1, the most ever loaded onto any kind of Starbucks card. Mobile e-gifting also delivered record holiday results, with the most popular days for e-gifting being Christmas Eve and Christmas Day.

Local coffeehouses in some neighborhoods compete effectively with Starbucks. Most don't. The one that's across the street from the Starbucks in my neighborhood will shut down in less than a year. That's another guarantee. Why? There's no vibe, no reason, just nothing compelling that would draw a customer into this local establishment over Starbucks.

Down the street, however, there's a coffeehouse that will not only stay open as long as its owners desire, but will continue to expand. Sometimes you just can't put your finger on it, but certain local coffeehouses organically create an inviting atmosphere that can compete with Starbucks. And they do it without multi-million dollar marketing budgets, ad campaigns and tech development teams.

Don't blame Starbucks for local's demise. You can compete with Starbucks at the local level if you can outthink and out-innovate Starbucks. If you think like a tech company. If you think like a lifestyle brand. If you refuse to think of yourself as a retail establishment that sells coffee. You must think of yourself as a tech company nurturing a lifestyle brand that just so happens to sell coffee.

--Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.
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