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With Starbucks’ Grocery CRM Plan, It Had To Get Clever About Fraud

March 26th, 2013

Part of the explanation may be in the anti-fraud packaging. The very nature of a mobile app is to be easily usable in-aisle or anywhere the shopper happens to be. The design of this grocery CRM program is to make it difficult to work—messy to work with—outside of the kitchen table at home. Today, at-home still typically suggests a more comfortable desktop access.

The alternative to the messy packaging approach would be to perhaps scan register receipts or to—heaven forbid—try and share data across competing retailers. Plus, it pushes shoppers to enter as much CRM-friendly data at the site as possible. (I am going to try and resist suggesting that Starbucks’ use of adhesive is making its site stickier, but I may fail.)

Another interesting aspect of this program is that this isn’t really coming from Starbucks the retailer as much as it is coming from Starbucks the manufacturer. Although there certainly exist other manufacturers who are also retailers—Apple Stores (NASDAQ:APPL), Niketown (NYSE:NKE), M&Ms World, Disney Stores (NYSE:DIS), etc.)—they are overwhelmingly manufacturers first and dabbling in retail. Starbucks is that rare example of a retailer who is dabbling in being a manufacturer (specifically one whose products are sold in stores it does not control, as opposed to Costco [NASDAQ:COST] and Walmart [NYSE:WMT] selling their own re-branded products in their own stores).

As a manufacturer, Starbucks faces the same challenge as most manufacturers: figuring out exactly where its products end up. (JCPenney [NYSE:JCP] came up with the one of the more compelling tactics to track where its products end up being gifted.)

And with Starbucks, the goal is not solely to sell more products in grocery stores and warehouse clubs. It’s to lure those shoppers into Starbucks stores, where the profit margins can be a lot higher and the revenue potential much brighter.

The sticky sticker approach has the added benefit that it requires zero cooperation from the retailer distributors, who might see themselves as quasi-competitors, especially if they perceive Starbucks as trying to compete with them in selling Starbucks products.


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Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

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