SEATTLE -- Starbucks Corp. turned in disappointing sales growth for its first-quarter fiscal 2017, reported USA Today. The company cited congestion in its stores at peak times for causing some people to leave without buying anything. Starbucks said the popularity of its Mobile Order & Pay option, which was supposed to make getting a drink easier, has caused bottlenecks at the areas where people pick up their drinks.
“We were significantly impacted by a good problem—a problem that we will solve—and that is the congestion and the runaway success at peak of Mobile Order & Pay. We didn’t anticipate how successful Mobile Order & Pay would be, and it has created a bottleneck for us,” CEO Howard Schultz told CNBC’s Jim Cramer in a separate report.
Cramer described his local Starbucks as “a bit of a mosh pit where I pick up, and that’s a struggle for me.”
“Don’t you need to rearrange things in the store? Add more people? It’s not as comfortable of a ‘third place’ as it used to be,” he said.
“We recognize it, and we understand it very clearly,” said Schultz about the mobile ordering and pickup problem. “We’re in our stores every day, and certainly in high-volume stores like New York City and the East Coast. In the morning daypart, we are facing this congestion problem and the anxiety of the customer. But it is a problem we will solve, and it won’t take us that long. … In the quarters that follow, we will get back to the experience that you have come to expect and love at Starbucks.”
The congestion problem is commonly known within the restaurant industry as “throttling,” or orders exceeding the capacity of a unit to execute them simultaneously, according to a report by Restaurant Business magazine. It is regarded as the downside of what is called frictionless service, or enabling customers to place and pickup orders without the delay of interacting with staff.
For the quarter ending Jan. 1, the Seattle-based company’s U.S. sales rose 3% at established stores. But the increase was the result of higher spending per visit, said USA Today, with more people tacking on items such as breakfast sandwiches and other food.
Customer visits, meanwhile, were flat when factoring out the impact of a change in the loyalty program, according to the company.
Starbucks said about 1,200 of its stores were getting more than 20% of their transactions from Mobile Order & Pay during peak hours. In total, Mobile Order & Pay accounted for 7% of all U.S. transactions, up from 3% a year ago.
The company pointed to other positive signs, such as the growth of active rewards program members in the United States to nearly 13 million.
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