Starbucks Targets 45 Million Loyalty Members by Mid-2020s

Need to Know

• Starbucks Rewards customers contributed 50% of the company’s net sales in Q1, compared to 43% last year, and 47% in Q4 2020.
• Starbucks Rewards has 22.9 million 90-day active members, representing an 18% year-over-year increase.
• Mobile orders represented 26% of US store sales, an increase of 18% over last year.
• CEO Kevin Johnson said doubling that 22.9 million member number is the new target—”I’m not going to give a timeframe. It might take a couple of years, but double that number.”

Analysis

Starbucks reported strong digital sales growth in Q1 of 2021, driven largely by its Starbucks Rewards loyalty program.

In the first quarter of 2021, Starbucks Rewards customers contributed 50% of the company’s net sales and 52% of net sales in the US. In the same quarter last year, Rewards customers contributed 43% of net sales, while in Q4 of 2021, loyalty program members drove 47% of sales.

“Our pioneering digital capabilities not only successfully transform our digital relationships to drive mobile ordering, but also amplify convenience and safety, which are both very much top of mind for our customers,” Starbucks CEO Kevin Johnson said of the company’s Q1 earnings. “We continue to leverage the advantages of our mobile app to elevate the personalization of the customer experience and deepen customer engagement.”

Starbucks Rewards resulted in a huge spike in mobile sales for the company, with mobile orders accounting for 26% of store sales in the US, representing an 18% year-over-year increase. Meanwhile, Stars for Everyone, a new program launched by Starbucks six months ago, saw an increase of 19% in active 90-day members. Stars for Everyone allows customers to choose from a range of payment options, including cash, debit, credit, and select mobile wallets, after they use the Starbucks app to place their order.

Starbucks saw its Rewards membership grow exponentially over the quarter, with a million new members joining in Q1. Starbucks Rewards now has 22.9 million 90-day active members, which is an 18% year-over-year increase.

“When we were at about 20 million active 90-day active reward members, we had this conversation with the team that said, look, I believe we have an opportunity to double that number,” said Johnson. “I’m not going to give a timeframe. It might take a couple of years, but double that number.”

Starbucks’ Q1 revenue was $6.7 billion, up 11% from a year ago.

The company has made significant digital moves in China in particular, launching a flagship store on JD.com, one of the country’s leading e-comm platforms, and expanding mobile ordering to the popular WeChat program. Mobile order sales accounted for 34% of sales in China in Q1; according to Johnson, mobile order sales overall have “more than doubled” in China over the past year.

Starbucks has remained ahead of the digital curve throughout the COVID-19 pandemic, introducing countless new programs and capabilities to better serve an increasingly digital customer base. While the Starbucks Rewards program has been chief among these initiatives, the company’s in-house AI tool, Deep Brew, is being used to future-proof Starbucks stores, being factored into the company’s development plans for everything from staffing and scheduling to inventory management and predictive ordering for customers. In April of last year, Starbucks leveraged its already-robust digital capacities to begin reopening stores after the initial raft of pandemic-born closures, leaning on its app for contactless ordering.