Shares of Starbucks Fall 4% Over Congestion Concerns





Starbucks mobile phone application. Concept image.Investors in Starbucks were in a nervous mood on Friday after the company's release of its Q1 earnings report.

While Q1 earnings met expectations, investors fretted over the company's 3% US comp number.

At the heart of the nervousness? A concern over the company's mobile ordering/pay program, which, in some ways, has grown too popular for Starbucks' own good.

According to the company, 7% of the company's transactions came via the U.S. Mobile Order and Pay program in the first quarter, while Mobile Payment represented 27% of all transactions. The rewards program continues to do extremely well, with the company reporting 13 million active rewards members in the United States alone as of the end of Q1.

The problem? The increased utilization of Starbucks' Mobile Order and Payment program is causing congestion issues at their stores.

According to Starbucks, the increased usage of the mobile pay technology is creating a bottleneck at stores.

After people place their orders via their mobile devices, they enter the stores and immediately head to the area next to the baristas where the drinks are picked up. Combine this with the people who order their drinks directly at the store, and you get a log jam of customers waiting to pick up their drinks.

This is apparently leading to dissatisfaction amongst many customers - those who order directly in the store, as well as those who are ordering via their mobile devices.

Starbucks has said that they are working on the problem and are 30 days into trying to find a suitable solution.

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Analysts are somewhat split on Starbucks at this point, with some arguing that the stock is currently a buy while others believe that a lower price would provide a better entry point.




Filed under: General Knowledge

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