Starbucks was something of a victim of its own success last quarter, with its CEO saying that loyal customers are backing out of purchases because of long wait times and product availability.
In its Q2 2024 earnings call yesterday Starbucks confirmed net revenue was down 2% to $8.6 billion, citing a “complex operating environment.”
CEO Laxman Narasimhan kicked off the call by making it clear he wasn’t thrilled with the results, telling investors: “Let me be clear from the beginning. Our performance this quarter was disappointing and did not meet our expectations.”
A cocktail of issues contributed to the results, but Narasimhan highlighted a particular phenomenon among loyal customers who have downloaded the Starbucks app, but are abandoning their orders before purchase. More than 60% of Starbucks’ morning business comes from reward members who use the company’s app—many likely on their commute and in need of their first hit of caffeine.
“What’s interesting though, despite strong mobile order and pay (MOP) sales, we saw a mid-teens percent order incompletion rate within the order channel this past quarter,” he added. “In other words, customers using MOP put items into their cart and sometimes chose not to complete their order, citing long wait times of product and availability.”
The maths equates to between one in seven or eight customers giving up on their order because of how busy their particular Starbucks cafe is.
Narasimhan, keen to ensure those customers stay, laid out a number of ways the brand is increasing efficiency to speed up shopper’s experiences.
The first is the continued rollout of the world’s second-largest restaurant chain’s “siren system,” a drinks machine which has custom ice and milk-dispensers with a series of blenders all within easy reach of a single barista.
These efficiencies are being combined with increasing supply availability, he said.
“Another reason customers…