Why Starbucks wants to export its digital technology

July 25, 2019 13:12
Starbucks wants to speed up the process of digitization in its more than 30,000 shops worldwide. Photo: Bloomberg

Global coffee chain Starbucks, already one of the most digitized in the food and beverage industry, plans to export its successful operating system to other restaurants as part of efforts to diversify its income streams.

Earlier this week, the Seattle-based company announced that it is acquiring a stake in Brightloom, a digital technology startup that provides cloud-based software to the restaurant sector. 

As part of the deal, Starbucks will license its digital technology to the San Francisco-based company. In return, Brightloom will be able to help in speeding up the process of digitization in the coffee chain's more than 30,000 shops worldwide. Together, they will also sell access to the platform to other restaurants.

Mobile payment and ordering have become essential features in the restaurant business. Starbucks is one of the leaders in this field. It has already built a comprehensive online-to-offline business model that allows customers to enjoy their coffee inside the store, in the office or at home, or on the go.

It has teamed up with meal delivery service providers to enable customers to make an order using their smartphone.

Now Starbucks has made an investment in Brightloom to expand its mobile order and payment system, along with its loyalty program and delivery service, to more stores.

The company has one of the most sophisticated loyal programs in the industry. Its rewards program has nearly 17 million members.

However, among its shops worldwide, the adoption of its digital offerings is still low.

Less than half of its mar­kets have adopted its mo­bile app, while only eight accept digi­tal pay­ments, ac­cord­ing to the com­pany.

That being the case, Starbucks would like to tap Brightloom's expertise to boost the adoption of its core technology platform to maintain its leadership in the field.

The partnership is likely to involve a sort of merger of technologies that will expand and enhance the digitization of its shops worldwide.

The new solutions will offer a complete end-to-end, cloud-based software-as-a-service platform, allowing any restaurant to provide its own mobile engagement, loyalty and digital ordering offerings to its customers.

A new operating system will be built to enable other restaurants as well as Starbucks franchisees to adopt the latest technology in a much easier way as it will be cloud-based. The system will link restaurants to their customers and third-party delivery platforms.

Accepting mobile orders and payment is particularly crucial for restaurants that want to capture the younger generation of customers, who use their smartphone to settle everything from ordering a meal and paying for it to complaining when it has not arrived on time.

Fast Company magazine said such a collaboration will create an Amazon Web Services for restaurants, a cloud-based solution from a coffee brand “known more for pumpkin spice latte than tech”.

For its part, Starbucks wants to sell its own core technology to other restaurants in order to defend its uniqueness in the market as it faces intensified market competition from a range of other brands.

Luckin Coffee, for example, is a fast-growing coffee chain in China that was founded only two years ago.

Currently, it has more than 2,000 stores across the nation, and it is determined to continue expanding.

The ambitious startup serves as a reminder to Starbucks that it cannot rest on its laurels, especially in the face of rivals that are aggressive in offering the cheapest price and most efficient mobile service.

And Luckin is not hiding its global ambitions. As it works frenetically to become the coffee chain leader in China, it has partnered with Kuwait's Americana Group as part of its overseas expansion plans.

Starbucks, therefore, has to speed up its plan to export its core loyalty program and mobile payment system to protect its turf and boost its market share, especially in emerging markets.

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EJ Insight writer