How Starbucks Will Build on Mobile Order to Launch Delivery Service in 2015

SAN DIEGO, CALIF. (TheStreet) -- Just hours after Starbucks (SBUX) kicked off a mobile order pilot program in Portland, Ore., the coffee conglomerate provided Wall Street first-time specifics on how it plans to build on the digital pay-ahead option to launch a delivery service next year.

"Mobile ordering is not just order-ahead, but it's also the potential for mobile ordering and delivery, again a significant potential transaction driver for the company," Starbucks Chief Digital Officer Adam Brotman said at the company's biennial investor day, held at its Seattle, Wash. headquarters. "Delivery is one our most-requested ideas for unlocking the power of our mobile app."

The company's mobile order initiative, Brotman said, will lay the foundation for a delivery service that the company plans to launch in select markets in mid to late 2015.

 

Wednesday afternoon, Starbucks went public with the new mobile order option, which is now available to Portland area customers inside the retailer's updated iPhone application. Mobile order will soon be available on the Starbucks for Android application, and the system will launch across the U.S. before the end of 2015, the company said. The skip-the-line digital option lets customers place orders, customize drinks, and preview wait times at nearby stores right from their smartphone.

The feature is not meant merely as a novelty addition, but rather intended as an instrumental driver of sales. The company expects the added convenience of order-ahead to increase the frequency of customer visits and give the brand a way to up sell mobile customers on food items. 

And with mobile order comes Starbucks next big mobile commerce opportunity: delivery. Though the company previously noted that it was working on a delivery system, Brotman Thursday gave Wall Street new insight around the coming-soon service. 

 

Starbucks is currently exploring two delivery options. The first is called "green apron delivery," and has Starbucks targeting high-density places such as office buildings with high-volume production areas where partners, in green aprons of course, will be ready to deliver food and beverages.

The second delivery channel is being referred to as "contracted delivery." Starbucks, said Brotman, will deliver orders to customers in urban and suburban areas. "We will provide delivery service from our current stores ... and we will work with one or more third-party delivery partners," Brotman said of contracted delivery. 

In addition to outlining upcoming mobile initiatives, Starbucks spent Thursday morning walkinginvestors through a five-year plan that it expects will get the company to 30,000 stores and $30 billion in annual sales, as well as allow it to double its operating income. Matt Ryan, Starbucks' head of global strategy, outlined several initiatives to achieve those goals, including targeting growth outside the U.S. with new store formats, bringing customers back to stores for afternoon and evening food purchases, and aggressively pushing ahead in the tea category with the Teavana brand. The company, said Ryan, is also working on ways to extend its popular pay-by-phone and loyalty program into a "commerce platform" that works outside Starbucks stores, though specifics were not shared.

Starbucks shares were trading up 1% at $81.35 on Thursday afternoon, with shares around 1% shy of the company's 52-week high of $82.30.