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Why Starbucks' New Mobile Payments Will Be 'Transformational'

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Why Starbucks' New Mobile Payments Will Be 'Transformational'
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Understanding the role of Starbucks Corporation’s (NASDAQ: SBUX) planned 2015 rollout of its food and beverage delivery service would require a step back and a broader view of context, according to Wedbush Securities analyst Nick Setyan.

Setyan told Benzinga he saw the delivery service as a "great idea," but only when viewed in perspective, something he said the media had done a poor job of reporting.

According to Setyan, the new mobile order and pay function, to be rolled out in the first half of FY 2015, would set the stage for what would follow.

Setyan said customers would see immediate benefit when using their smartphones to place an order for their daily caffeine fix.

Related Link: 3 Things Starbucks Investors May Have Overlooked

No Standing In Line

"We're literally going to be able to select what we want before walking into a SBUX store, pay via our mobile devices, walk in and just pick it up without waiting in that 10 minute line at 8 a.m.!," the Wedbush Securities VP wrote via email.

Setyan added, "It's going to be transformational, in my opinion."

"Once this mobile order and pay is in full use," Setyan said, "wouldn't it be great if I didn't have to walk into a store since I already paid for it?"

That, according to Setyan, is where the delivery service comes in.

Sparse Details

Benzinga reached out to Starbucks Corporation for comment on the planned delivery service.

A Starbucks spokesperson offered little in the way of details, noting simply that mobile order and pay would enable Starbucks to "… further enhance our customer experience and exceed our customer’s expectations of convenience."

The spokesperson added, "Starbucks will drive a further step-change in customer loyalty and engagement by extending mobile order and pay to include food and beverage delivery in select markets during the second half of 2015."

At Extra Cost

Setyan ventured that although the company has not shared details, he expected delivery to cost extra.

"In 30 years of SBUX being in business," Setyan said, "I've never known them to give anything away for free," adding that the company's margin guidance for next year implies no hit from delivery costs.

Starbucks Prime

Digital Trends hypothesized that Starbucks could utilize its loyalty program in a way similar to the way Amazon.com, Inc. (NASDAQ: AMZN) structured Amazon Prime.

Customers could pay a monthly or yearly fee to receive coffee and other goodies without an additional delivery charge.

So far, speculation about Starbucks coffee delivery drones has been minimal.

At the time of this writing, Jim Probasco had no position in any mentioned securities.

Posted-In: Amazon Prime digital trends mobile Nick Setyan Wedbush SecuritiesAnalyst Color Top Stories Tech Best of Benzinga

 

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