Starbucks (SBUX) - Get Starbucks Corporation Report has been a digital pioneer leading the restaurant industry in everything from mobile order and payment to behind-the-scenes efforts like automating much of its inventory process.
Now, the company has a plan to innovate again by using blockchain to expand the value of the "Stars" the customers earn through its loyalty program.
That's potentially a massive, public-facing use for blockchain technology because Starbucks closed its fiscal fourth quarter with 24.8 million members in its U.S. loyalty program and 51% of the revenue for company-owned stores came from sales to members of the program, according to CEO Kevin Johnson speaking on the Q4 earnings call, which was transcribed by The Motley Fool.
How Will Starbucks Use Blockchain?
Johnson wants Starbucks' "Stars," which members earn for every dollar spent with the coffee chain, to be more of a currency instead of just being for the company's loyalty program redemptions.
"Through blockchain or other innovative technologies, we are exploring how to tokenize Stars, create the ability for other merchants to connect their rewards program to Starbucks Rewards," he said. "This will enable customers to exchange value across brands, engage in more personalized experiences, enhance digital services, and exchange other loyalty points for Stars at Starbucks."
When Will Starbucks Use Blockchain?
Johnson expects to see the actual implementation of this plan relatively soon.
"Over the next year, you will see the first instance of this loyalty points exchange with other consumer brands," he said. "This approach will also serve as a foundation for a more aspirational concept for new, modern payment rails that align payment expenses with the value received by customers and merchants. We intend to be at the forefront of this disruptive innovation, which will unfold over the next few years."
Starbucks already has payment partnerships with PayPal and Bakkt, which allows customers to reload their Starbucks card with a range of cryptocurrencies including Bitcoin, Ethereum, and others by converting digital currencies to physical currency.
Starbucks Is on the Cutting Edge
Johnson, a former Microsoft executive, has focused on efficiency and operations since he was named CEO of the coffee giant in 2015. That has involved improving the customer experience both in-store and through the variety of pickup methods the company offers.
In addition to its blockchain efforts, Johnson has led the company's effort to create the Tryer Center, a mix between a lab and a functional store where new ideas can be tested. He's also confident that his company has a lot of innovation in the works that will improve the experience for customers.
"Examples include our Mastrena 2 espresso machines that more efficiently pulls triple shots of high-quality espresso, our Deep Brew, artificial intelligence platform that has automated daily inventory management, and store staffing and training improvements designed to reduce complexity in our stores," he said.
Starbucks shares are up 15% over the past 12 months and just under 100% over the past five years.
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