advertisement
advertisement

Starbucks Digital Tip Effort: Will It Really Translate From Cash To Mobile?

Written by Evan Schuman
October 10th, 2012

When Starbucks announced on October 4 that it plans to add a way for shoppers to tip Starbucks’ associates through its mobile app by next summer, the chain confirmed the latest unintended mobile payment consequence. The nature of a coffee chain is such that using cash is going to be decidedly more dominant than in apparel, consumer electronics, home repair or grocery. The Starbucks stored-value card already cuts into cash payments, but the mobile app threatens an even deeper cut.

The lack of cash payments rips into tips, which hits employee compensation. Not only are tips employee compensation that the retailer doesn’t have to fund, but tips can enable employees to be paid less in salary. Mobile payment has far greater convenience, but its ability to undercut tips is something few retailers have seriously considered.

Clearly, this is important to Starbucks. It’s important enough for the company to violate one of the golden rules of mobile app announcements: Never announce a capability before it’s deployed. In this case, Starbucks announced on October 4, 2012, a feature that it is not even promising until summer 2013, which could be as long as 11 months away. It seems the coffee chain felt a barista revolt was about to boil over—or should we say Starbucks had grounds for such concerns? (Both coffee plays-on-words are equally bad, so it’s hard to choose.) Will a mere announcement of vaporware be enough to calm the caffeinated waters?

Even worse, there is a question about how well tips will translate from cash to digital. It’s very efficient, and almost instantaneously quick, to pay for coffee with a $10 bill and then take some of the change—perhaps all of the coins and maybe some paper—and drop it into the tip mug.

For many experienced Starbucks shoppers, it’s often one seamless movement. The phone, though, will require additional time to select a tip, think about and figure out the amount, key it in and then hit save. That process may not be especially onerous, but compared with the existing cash tip approach, it’s not a given that tips won’t suffer. Also, the deliberate thought required for the mobile app may further reduce tips.

Ahhhhh, unintended consequences. Mobile is full of them.


advertisement

One Comment | Read Starbucks Digital Tip Effort: Will It Really Translate From Cash To Mobile?

  1. Joe Says:

    Maybe presets to round up to the next dollar, or next dollar plus 1 dollar for the tip. If you built those presets into the app, when your code is scanned, it just adds those amounts to the total. Granted, if you pay before you get your coffee might have wished you didn’t tip, but this tipping issue is the main reason I don’t use my Dunkin card. I see the same woman every morning and I feel like I’m cheating her out of a tip if I pay by the app. If DD builds the same ability in, I would definitely use it more.

Newsletters

StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!
advertisement

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...

StorefrontBacktalk
Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.