Can Starbucks make Web3 mainstream?

It can be difficult to know where to begin when dipping a toe into Web3 – or taking a cannonball plunge. In comparison to existing financial systems, underlying technologies such as protocols, wallets, and exchanges are still in their infancy. New types of tokens appear to be introduced on a daily basis. Web3 adoption has increased in recent years, but it remains far behind Web2’s ubiquity. The industry has a long way to go to match current system functionality, particularly for consumer purchases in developed economies with stable currencies. How long will it be before using cryptocurrency to make a standard consumer purchase, such as purchasing a cup of coffee, becomes a joy rather than a gimmick?

Here comes Starbucks. Starbucks Odyssey, its new non-fungible token (NFT)-based reward program, may bring us one step closer to making this a reality, or at the very least provide some direction.

Early indicators of Starbucks Odyssey

According to recent announcements, the program is still very much in the planning stages, and the specifics have not yet been made public. However, based on what we currently know, Starbucks has made some positive choices that can act as models for other corporate Web3 initiatives.

First off, Starbucks Odyssey is a supplement, not a replacement. Starbucks currently has nearly 60 million rewards customers worldwide, including 30 million in the United States alone, making it arguably the most successful loyalty program in the world. The loyalty program encourages repeat business, upselling, and customer personalization, which together account for about 50% of all Starbucks revenue.

Given the recent development of the technology and the doubtful viability of an NFT-based program, it would be a significant leap of faith for Starbucks to abandon its enormously successful traditional rewards program and replace it with a Web3-based program. Starbucks is able to expand on the current program with complementary products while minimizing risk to the cash cow by making Starbucks Odyssey an optional, additional rewards program. This gives the company greater flexibility in the future should the dynamics surrounding Web3 technology change.

Second, the program naturally appeals to important demographics. Millennials between the ages of 25 and 40 make up 50% of Starbucks’ customer base, followed closely by young adults between the ages of 18 and 24. Growing and maintaining this customer base will become more crucial as the Starbucks brand develops and faces challenges like labor disputes, rising supply chain costs, and labor shortages.

Starbucks Odyssey 2022

Despite being a very new technology, NFTs are appealing to this user base. The generation Z group is the one with the most investment knowledge and general enthusiasm for NFTs. Millennials are the second-largest group of people who have invested in or are interested in NFTs, which is encouraging for Starbucks’ main customer groups.

Third, all signs point to Starbucks utilizing top-tier user interface/user experience (UI/UX) design to close the knowledge gap between novices and NFT/blockchain users. Because of its seamless UI/UX design, Starbucks has had great success with its mobile order and pay functionality. With Forum3, led by co-founder Adam Brotman, Starbucks is working on the Odyssey rewards program. Brotman was Starbucks’ chief digital officer before helping to lead the design of the company’s mobile order and pay system. He also co-founded the Web3 loyalty startup. This suggests that Starbucks Odyssey will try to mimic the seamless experience that customers currently enjoy.

Ironically, this may require concealing many of the distinctive features of Web3, at least temporarily. Brady Brewer, executive vice president, and chief marketing officer, even went so far as to say: “The customer, to be honest, may very well not even know that what they’re doing is interacting with blockchain technology.” It is built on blockchain and Web3 technologies.

Beyond marketing

Starbucks Odyssey appears to be a promising Web3 technology implementation for today’s environment. However, realizing Web3’s full potential will necessitate some difficult design decisions. Here are a few examples of what we anticipate:

Managing the impact of rumors: Starbucks declared it would permit owners of NFTs to trade them in peer-to-peer (P2P) exchanges. Peer-to-peer trading of NFTs invites speculators, whose presence fundamentally alters the experience of organic users, frequently in a negative way, as the gaming industry has learned. To lessen the effects of speculation and guarantee that the rewards program continues to offer the desired incentives, Starbucks will need to create markets and other mechanisms.

Utilizing Web3 technology to its fullest potential: Web3 technology, particularly blockchain, helps users by giving them better control over their assets. The current Odyssey design explicitly forbids user interaction with the underlying technology, which is necessary to fully realize these advantages. It is unclear how Starbucks will handle user requests for features like self-custody, as well as whether users will even want such features in the first place.

There is no doubt that Starbucks will benefit from publicity from being a leading company engaging with Web3 by launching in-demand NFTs and achieving profitability. Additionally, receiving free NFTs will no doubt please a lot of consumers. However, Starbucks will undoubtedly want to go beyond marketing costs and establish a successful business that brings in both direct and indirect revenues.

The market has demonstrated that just because an NFT exists does not necessarily mean that customers want to pay for it. Starbucks must design digital rewards that are captivating enough for its customers, especially the Gen Z crowd, to serve as the cornerstone of a successful rewards program and draw recurring revenue streams. To ensure that this program is more than just a passing fad before the next emerging technology emerges, one or both of these goals must be met.

Although it is unknown how Starbucks will overcome these challenges, Starbucks Odyssey will nonetheless be an intriguing and extremely instructive test case for corporate Web3 implementation. Most intriguingly, it offers a test of Web3’s adoption potential and restrictions. Will Starbucks finally bring Web3 into the mainstream now that the most consumer-focused company is in charge?

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