Starbucks’ New CEO Faces ‘Achilles Heel’ of Mobile Ordering

Is Starbucks’ mobile app the company’s greatest weakness?

Former CEO Howard Schultz has said as much, per a recent podcast appearance. And it’s something new CEO Brian Niccol will likely tackle first when he takes the helm at the coffee chain next month, CNBC reported Sunday (Aug. 18).

According to that report, both investors and executives have blamed operational troubles for the company’s lagging sales, with Schultz telling the Acquired podcast earlier this summer that the mobile app is a problem, calling it “the biggest Achilles heel for Starbucks.” 

CNBC notes that mobile orders make up about a third of the company’s sales, and are typically more complicated. Add-ons such as foam and syrups help generate profit, but they also take up baristas’ time, leading to frustration on both sides of the counter.

“I agree with Howard Schultz,” Robert Byrne, senior director of consumer research for Technomic, a restaurant market research firm, told CNBC. “This is not in the data — this is in the store. This is where the issue lies.”

In late April, outgoing CEO Laxman Narasimhan said the company was having trouble meeting demand in the morning — and driving off customers with long wait times. And Schultz, during his Acquired appearance, said he experienced the problem firsthand at a Starbucks in Chicago.

“Everyone shows up, and all of a sudden we got a mosh pit, and that’s not Starbucks,” he said.

Starbucks announced the appointment of Niccol last week. He joins Starbucks after six years as CEO of Chipotle, and on the heels of a mixed earnings report for the coffee giant, which saw global comparable store sales dip 3%. This was driven by a 5% decrease in transactions in spite of a 2% increase in average ticket size.

“We are operating in a challenging consumer environment. You see the impact of that in away-from-home consumption,” Narasimhan said on an earnings call. 

PYMNTS wrote last week that industry analysts were positive in their assessment of Starbucks’ hiring of Niccol, who also served as CEO of Taco Bell from 2015 to 2018.

“It’s surprising, but he may just be the perfect fit for the organization,” said Greg Zakowicz, senior eCommerce expert at Omnisend. “He has an impressive background, especially in the food industry where products are nonessential items, and has successfully led companies like this during challenging economic times. 

“With a continual increase of consumers trading down on items like groceries, I don’t think this should be understated,” he added. “He knows how to appeal to consumers at times when their wallets are tight. That is one thing Starbucks desperately needs.”

 

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