Starbucks boss Howard Schultz: America is 'over-retailed’

Melody Hahm
Senior Writer

Starbucks boss Howard Schultz plans to open 12,000 more stores over the next five years, he announced today. But at the same time he said brick-and-mortar is a dying breed.

“We’re going to see a very major downturn in the fact that the country is over-retailed in lots of categories. We’re going to see significant, major brands — as we’ve seen already — not open many stores as they have in the past and it’s the beginning of lots of companies announcing store closures,” Schultz said.

Though his remarks at Starbucks’ investor conference, streaming live on Yahoo Finance, may seem paradoxical given the expansion plans, he is most bullish on mobile payments and has been for the last several years.

Starbucks first launched mobile payment six years ago, in January 2011. By downloading an app and adding your Starbucks card information, it provides an efficient and convenient way to pay for your coffee. Companies like Walmart (WMT), Dunkin’ Donuts (DD), CVS (CVS) and Taco Bell (YUM) have all followed suit by launching their own mobile programs.

Though the majority of retailers aren’t investing heavily in mobile, Forrester Research found that apps accounted for 42% of 2014 mobile sales for the retailers ranked in the 2015 Internet Retailer Mobile 500, a survey of leading mobile retailers worldwide. Companies like Neiman Marcus, Kohl’s (KSS), and Victoria’s Secret parent company L Brands (LB) derive more than 60% of their mobile revenue from apps.

Today, one in four Starbucks payments is mobile, and the fraction of mobile-based purchases will only rise from here. Schultz said he’s proud of Starbucks being ahead of the curve when it comes to seamlessly integrating technology into the retail experience.

“[Companies] can no longer rely on interception traffic; they’re going to have to become a destination,” he said.

Schultz said executives won’t be able to justify the paltry returns compared to the costly investment in infrastructure and physical retail space.

“Starbucks identified it very early and began to invest significantly ahead of that curve in all things mobile, and there’s no doubt that created a leadership position in the flywheel of Starbucks, which was driven by the mobile ecosystem,” he said.

With behemoths like Amazon (AMZN) trying to reinvent the grocery store, it may already be too late for companies neglecting mobile to play catch up.

Melody Hahm is a writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Read more from Melody here & follow her on Twitter @melodyhahm