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Niccol plans to sequence mobile orders with an algorithm

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Mobile orders disrupt Starbucks' ( SBUX ) in-store customer

experience

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Niccol's strategy contrasts with predecessor's mobile

order

focus

By Juveria Tabassum, Waylon Cunningham

Jan 28 (Reuters) - Starbucks' ( SBUX ) new CEO, Brian

Niccol, has a vision to make Starbucks ( SBUX ) into a classic

coffeehouse, but he has to contend with an unusual challenge:

the company's mobile orders are as disruptive as they are

popular.

"They come in flooding faster than our customer can get

there," Niccol said in a call with investors on Tuesday. He said

baristas' rush to pile those orders on the counter comes at the

expense of providing a more personal touch to in-store

customers.

Niccol called out mobile ordering as a bottleneck five times

during the call, and said the company -- which on Tuesday posted

a smaller-than-expected drop in comparable sales -- would work

toward sequencing mobile orders with the help of an algorithm to

improve efficiency behind the counter.

In some ways, Starbucks' ( SBUX ) abundance of mobile orders has

presented an opposite problem to what Niccol faced six years ago

when he was CEO of Mexican restaurant chain Chipotle when he

oversaw the launching of a mobile app and drive-through lanes

dedicated to orders from that app, called Chipotlanes.

Niccol told investors in October 2018 that he believed less

than half of Chipotle's customers knew they could order through

digital channels. "We need to improve that dramatically," he

said at the time.

Starbucks ( SBUX ) introduced mobile ordering in 2015, and customers

quickly took advantage of it.

Mobile orders took precedence for Starbucks ( SBUX ) under Niccol's

predecessor Laxman Narasimhan as the company focused on driving

traffic through its rewards program members tapping into offers

and discounts on the app.

In contrast, comfortable seating, ceramic mugs and baristas

with Sharpies and personalized messages on coffee cups have been

at the center of Niccol's attempt to take Starbucks ( SBUX ) back to its

roots, and the hustle of mobile orders stands counterintuitive

to that strategy.

The company is piloting an in-store prioritization algorithm

to sequence mobile orders away from the current first-come,

first-served basis, said Niccol, who was awarded compensation of

nearly $96 million in 2024, a year in which he joined Starbucks ( SBUX )

as CEO in September. The pay package made Niccol one of the

highest-paid executives in corporate America.

"I was in one of our stores this morning where we've already

started to put this algorithm in," Niccol said. "That happens

behind the scenes, and it smoothes out those rushes of mobile

orders such that our teams are able to provide great moments of

connection for the in-cafe customer and the mobile order

customer as well."