A tipping point for Barista’s

Starbucks’ app to allow barista tips via your phone

It may surprise nobody when I say I’m a big fan of Starbuck’s.  I drink a lot of their coffee. I use a lot of their wi-fi. I look for their places when I am in a new city because I know it will be a pleasant oasis.  I also use their app to pay for those many cups of java, since it gets me a free drink every now and then.

They just updated the app with a new look and feel, and a new bit of employee (or “partner” in Starbuck’s vernacular) oriented functionality.  The new Starbuck’s app allows customers to add a tip for your barista  on the tab.

I thought this was a great idea for a couple of reasons. As a customer, I quite often don’t have cash in my pocket to drop in the tip jar, and so my barista gets screwed.  The tip function on the app fixes that issue for me. Right on!

As an HR and labor geek, I have read in the past that some Starbuck’s partners were disgruntled over the fact that  as Starbuck’s adopts newer methods of payment, their tips had dropped, effectively cutting their wages.  When I heard about the tipping functionality, my first thought was , “what a great move by the company to address an employee relations issue, and a wage concern!”  Right on, right?

Maybe not.  It turns out that the new tip function may not be a positive development for Starbuck’s partners after all.  According to an interesting piece in CNN Money, just because customers can tip via the app, that doesn’t necessarily mean workers will make more.

Starbucks baristas, who earn an average hourly wage of $8.80, make only about $1,300 in tips per year, according to Glassdoor. The hope is that the growing popularity of mobile payments and the introduction of digital tipping will increase tipping.  Electronic payments are easy to execute; inevitably, it feels less burdensome than parting with hard cash.  But these factors alone won’t automatically change customer behavior, not to mention that this option is only available in 64% of Starbucks stores in the U.S.

Given that Starbucks stores average 618 customers per day, according to a study by Trefis, and customer service across the chain is generally good, the yearly tip number seems inadequate. By my own estimates, a minimum gratuity of 50 cents (which is the least you can tip through the mobile app and also a reasonable amount by experience) applied to the yearly average of $1,300 per barista, implies that 2,600 customers tipped.  But even if you assume that baristas (being part-timers) only work 3 days a week, they would still encounter more than 100,000 customers a year. That means only 3% of customers bothered to tip at all, and that is a low number by any standard.  It’s worth noting that some customers probably tip higher than 50 cents, which would suggest that a fewer share of customers tip.

I saw a comment on Glassdoor  where a Starbuck’s partner speculated that collecting the money electronically, rather than via cash may actually delay their receiving money, effectively reducing his standard of living.

It seems as though this was a well intended idea, but not one that is being universally accepted by the workers.


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