Starbucks, the leading proponent of remote ordering, has now become its outstanding victim. The chain attributed an uncharacteristic decline in transactions at the end of 2016 to stores being slammed with orders placed via app, clogging operations and prompting prospective customers to walk out without making purchases.
Management termed the backup “congestion,” but the phenomenon is commonly known within the industry as “throttling,” or orders exceeding the capacity of a unit to execute them simultaneously. It’s regarded as the downside of what’s called frictionless service, or enabling customers to place and pick up orders without the delay of interacting with staff.
CEO Howard Schultz told Wall Street the brand is looking at operational changes to alleviate the bottleneck caused by too many orders pouring into units simultaneously from smartphones and tablets. He called the problem a good one to have.
The chain revealed that about 7% of customers order their coffee and food digitally, or more than double the level of a year ago.
For the last three months of 2016, or the first quarter of Starbucks’ fiscal 2017, domestic transactions declined by 2%. The chain continued to outpace the industry with a 3% gain in same-store sales at U.S. stores, but it acknowledged the gain was attributable to a 5% increase in average checks.
It attributed that gain to customers spending more on food than they did in the past.
Revenues for North American restaurants rose by 7%, to nearly $4 billion.
Starbucks opened 251 stores during the quarter, or 80 more than it did during the comparable quarter of fiscal 2016.