Will Mobile-Only Coffee Shops Work in the U.S.?

Starbucks popularized mobile-ordering and is now a leading form of mobile payments. That’s mostly because it solves tangible pain points like saving people time. That’s our longstanding rant on success factors amidst “solution in search of a problem” mobile payment products.

But more to the point, is mobile-ordering enough of a “thing” to justify stores that only offer it? One benefit we’ve examined is yield optimization. Mobile-only ordering can mean pumping out customer orders with less overhead (staff, polish, etc) than is required from high-touch fare.

Like anything else, it depends on the product category and type of store. It’s most conducive to coffee and QSR, which are inherently “fast” without customer expectations for high-touch hand holding. Coffee is more about personalized, recurring orders where speed is a factor.

With this concept in mind, our ears perked up when hearing about Bandit. The new mobile-only coffee shop in Midtown Manhattan was founded by former Uber for Business GM Max Crowley and based on his rudimentary field research that 80 percent of coffee orders are grab & go.

Making Out Like a Bandit

The setup is that you download the Bandit app, create a profile, order and pay. This is all done within the app, either on-site or en route. Just like Starbucks mobile-ordering, you then pick your order up when it’s ready and walk away. Authentication appears to be done by name.

What’s more notable about Bandit is its bare-bones location. Its first store is in an unfinished retail space oriented around an 11×11 countertop with built-in equipment to prepare and expedite coffee orders. This unit is assembled remotely then brought in to essentially plug and play.

This modular approach furthers Bandit’s lean strategy. More importantly, it follows the dynamics of pop up shops. The advantage here is being able to follow demand signals and seasonality with dynamic movement and portability. Setup/teardown is cheaper than traditional methods.

“We can launch [a new location] in a few hours, and we can do it at about a tenth the cost of a traditional store,” Crowley told Techcrunch.

Like the cloud kitchens phenomenon, the lowered overhead across the board also provides some leeway in the unit economics of the product itself. Coffee is in the $1-$2 range, versus the industry-standard $4-$6. $20 monthly subscriptions are also available for unlimited $1 drinks.

Will it Work?

This all sounds good and we’re fans of disruptive businesses that free up margin by eliminating the common overhead of legacy models. But a few questions arise. First, will this create mass confusion from passersby that walk into Bandit, only to be told to download an app?

Speaking of apps, another pitfall can be seen: download friction. Asking someone to download an app — especially for a new/unproven product — risks losing them. Resistance is high these days given app fatigue. Could a mobile web approach work, prompted by onsite QR codes?

Apparently, there are helpers on hand to assist. But anytime products have to educate markets on something new, it works against the lean approach that Bandit is going for in the first place. How long will it take before the paradigm is culturally accepted, without onsite human help?

In fairness to Bandit, mobile ordering is indeed becoming more culturally accepted in the U.S. — especially amongst digital natives who continue to take over the adult consumer population. As we reported recently, 20 percent of diners (across categories) use in-app order-ahead features.

Panning back to a global level, this isn’t a new phenomenon. Mobile-only ordering is fairly common in China, joining the several areas of consumer mobile behavior that are more prevalent there.  China’s Luckin Coffee is one example, and is even a source of inspiration that Crowley has expressed publicly.

For Bandit, Answers to the above questions will be revealed soon, as it plans to launch five more New York stores by Q2 2020. In addition to coffee as a product category, New York is probably a good testbed for this concept. The rushed dynamic mentioned above is in the bloodstream.

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