Starbucks: Buy it, own it, love it

A wildly successful loyalty program and huge growth in mobile payments justify blind faith in CEO Howard Schultz.

By TheStreet Staff Nov 2, 2012 1:35PM

TheStreet logoA Starbucks Corp., sign is displayed outside a coffee shop in London, U.K. / Chris Ratcliffe/Bloomberg via Getty ImagesBy Rocco Pendola

 

It's just easy to love some companies.

 

As an "objective writer," I know I'm not supposed to say that. I'm also not supposed to disrespect stats guys, bean counters or MBAs. I interact with these folks. They often wow me with their knowledge. And they inform my work.

 

There's a place for careful study of the numbers; however, investors ultimately lose if they live and die by the numbers.

 

 

Generally, I agree with Springsteen: "Blind faith in your leaders, or in anything, will get you killed," but not in relation to Starbucks (SBUX) CEO Howard Schultz.

 

With Schultz, as impressive as they are, you don't need numbers. I'll give you some anyway. The ones that matter -- from Thursday's Starbucks earnings call and an email I received from the company.

 
There is $3 billion loaded onto Starbucks cards. That's 25% of U.S. store tender, according to Schultz. There are 10 million Starbucks rewards loyalty program members; 50% or 5 million are active members. There have been 100 million mobile payment transactions since Starbucks launched its mobile app in January 2011. Count 'em, 2 million mobile payment transactions per week. That's just through the Starbucks app; later this month, the company launches what it calls a "complementary" mobile payment service in conjunction with Twitter founder Jack Dorsey's Square.

 

I took notes during the call. The following snippets from Schultz, all about mobile, resonated:

 

We believe the rabid adoption of mobile gives us an opportunity to create a unique and much deeper relationship with our customers directly and in the moment ... We have the unprecedented ability to ... explore new revenue streams in music and digital publishing..

 

... we continue to push the envelope ... by adding features and interactive activity in such areas as tipping, mobile ordering and personalization.

 

Starbucks is embracing the seismic shifts in consumer behavior that are well under way.

 

That's a humble understatement. There's nobody even close to Starbucks in mobile.

 

I gave you some quantitative and some qualitative data. Now, I'll throw in some personal experience. Everybody's multi-platform these days; I've always been a multi-method stock market ethnographer. When I got my iPhone 5 from Apple (AAPL), the first thing I did was download the Starbucks app. Apple started the mobile craze. And Starbucks was an early adapter.  

 

Here's the deal: In 2008, Stephen Gillett, now a president at Best Buy (BBY), joined Starbucks as CIO. In 2009, he hired Adam Brotman, now Starbucks chief digital officer. Working with a small team, Gillett and Brotman devised Starbucks' digital/mobile strategy and laid the groundwork for the Square deal that was finalized this past summer under Brotman's watch. 

 

They built the app. There might not be a better consumer/retail app out there. Heck, there might not be a better app overall. Not only is it beautiful and functional, it drives sales, as shown by Starbucks' exponentially growing number of mobile transactions.

 

I probably went to Starbucks once a month before I downloaded the app. I go every day now. Maybe the initial buzz will wear off, but I'm not so sure. These guys have it down.

 

Not only does the app get better with every update, but everybody's on the same page. It's rare to find a surly Starbucks barista. At all levels, people, by and large, love working for the company.

 

At the Starbucks I frequent, the barista -- we'll call her Selena Gomez because that's who she looks like -- treats everybody like gold. I went the other day. She remembered my drink ... because my wife had come in the other day and ordered for me. I wasn't with her at the time, but "Selena" obviously recalled seeing us at the location, inside a grocery store, in  recent weeks.

 

She proceeded to suggest a variation on my order: one with less sugar and more caffeine. "Selena" let me know I could just dump the drink and get what I originally ordered if I wanted to. It didn't matter. She nailed it. And now, because of her style and the mobile app, I'm hooked.

 

Starbucks now becomes habit. My individual anecdote is supported by several million other Starbuck card/loyalty program/mobile app "anecdotes." If you're going to have blind faith in any CEO and his/her executive team, make it Schultz at Starbucks.

 

I love Jeff Bezos at Amazon.com (AMZN). And, as I've written on The Street, I fully endorse investors giving Amazon the benefit of the doubt. However, there's no need to treat Starbucks this way because the company leaves very little doubt.

 

Don't second guess these guys. All together, they've got it down!

 

At the time of publication, the author was long SBUX.

 

 

 

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