At the Investor Day event later this month, Starbucks will introduce its web3 effort, which incorporates NFTs with a coffee theme. The business announced its plans to enter the web3 market earlier this year, claiming that its NFTs would not only act as digital collectibles but would also grant their owners access to exclusive content and other benefits.
At the time, Starbucks provided few details regarding the appearance of its initial set of NFTs, the exact functionality they would offer, or even the blockchain it was based on. It implied that the strategy was still being completed by stating that it was likely to be multichain or chain-agnostic.
Overall, the coffee shop kept the web3 revelation very low-key, stating only that additional information would be given later in 2022 and that it thought digital collectibles might provide an accretive business adjustment to its stores.
Starbucks appears to be taking a different strategy than some businesses, which hopped on the NFT bandwagon without giving their investments much thought in terms of how they would fit with their overall corporate objectives. It sees the collections as a continuation of the devotion of its customers. Adam Brotman, the creator of the Starbucks app and the company's Mobile Order & Pay system, was hired by the organization to assist as a special advisor on the project.
In terms of technological advancements, Starbucks' Mobile Order & Pay has been one of its greatest triumphs. Even before Apple Pay became widely used, the corporation was one of the first to offer the idea of a digital wallet. Starbucks mobile ordering has increased along with the growth of mobile payments more generally. Starbucks' U.S. sales from mobile orders, deliveries, and drive-throughs accounted for 72% of the total during the most recent quarter (the fiscal Q3 period). In addition, the company reported that as a result of changes in consumer behavior brought on by COVID, the mobile ordering sales mix increased to a record high of 47%, up 13% year over year.
Starbucks founder and now interim CEO Howard Schultz, who returned to the company in April, teased its forthcoming web3 initiative during this week’s earnings call with investors.
“We have been working on a very exciting new digital initiative that builds on our existing industry-leading digital platform in innovative new ways all centered around coffee and most importantly, loyalty, that we will reveal at Investor Day,” Schultz said.
The company had previously announced its plans to host its 2022 Investor Day in Seattle on September 13, 2022.
Schultz continued, “we believe this new digital web3-enabled initiative will allow us to build on the current Starbucks Rewards engagement model with its powerful spend to earn stars approach while also introducing new methods of emotionally engaging customers, expanding our digital third place community, and offering a broader set of rewards, including one-of-a-kind experiences that you can’t get anywhere else, integrating our digital Starbucks Rewards ecosystem with Starbucks-branded digital collectibles as both a reward and a community building element.
“This will create an entirely new set of digital network effects that will attract new customers and be accretive to existing customers in our core retail stores,” he added.
Though the details aren’t yet fleshed out, the approach here sounds potentially interesting — at least compared with some other corporate NFT projects (an admittedly low bar). The company hadn’t before clarified that the NFTs would be tied directly to Starbucks Rewards.
Currently, customers earn Stars with purchases in the app or at Starbucks stores, which can then translate into tangible rewards — like free drinks. It appears that the new NFTs will now be incorporated into part of this loyalty program, somehow. If customers were to “earn” the collectibles through everyday purchases, perhaps, that could potentially onboard more people to the web3 ecosystem. This is one of the challenges the space faces today, where purchases of digital art and collectibles often come at high costs and with sizable fees.
What’s more, the digital program could give customers a reason to care about NFTs, if the rewards and so-called “one-of-a-kind” experiences ended up being something actually worth earning. (Of course, that remains to be seen.)
There is some indication that consumers are interested in easier ways to enter the web3 space, however. For example, the crypto rewards app Sweatcoin has become a breakout hit thanks to how it rewards users with “Sweatcoins” for every 1,000 steps they walk. The app this past quarter was No. 4 by global downloads and No. 6 by monthly active users on data.ai’s list of “Top Breakout Apps” — meaning, those that saw the largest absolute growth in downloads in the quarter. There’s also now a good handful of games offering play-to-earn models, which aim to tie a fun activity like gaming to cryptocurrencies or NFTs. These have seen more mixed success as some gamers are opposed to the idea.
During the call, Schultz also stressed the value of catering to the younger consumer. Though his comments were more of a reflection of Gen Z’s demand for Starbucks’ cold drinks and iced shaken espresso — which drove sales in the quarter — a web3-based loyalty program could serve as another way to attract younger consumers to the brand.
“We don’t want to be in a business where our customer base is aging and we have a less relevant situation with younger people,” Schultz said, before touting that the company has “never been, in our history, more relevant than we are today to Gen Z.”
“To me, that cohort is so powerful, and the attachment rate that we have with them and the loyalty is just building,” he added.
Starbucks posted strong earnings in the quarter, beating Wall Street’s expectations despite the economic challenges. The company reported revenue of $8.15 billion versus $8.11 expected, and earnings per share of 84 cents adjusted versus 75 cents expected.
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