The success of Starbucks in China
Starbucks, founded in 1971, is a Seattle-based coffeehouse chain with more than 30,000 outlets around the world. In January 1999, Starbucks entered the Chinese market by opening its first store in the China World Trade Building, Beijing. Since then, Starbucks has already opened 4,000 stores in 160 Chinese cities and has become one of the biggest success stories of a multinational company in China. However, Starbucks has had a bumpy ride in the early years of development in China. At that time, the Chinese economy was not as burgeoning and prosperous as it is today. A great majority of Chinese people could not afford the high prices of a Starbucks coffee, rendering it a luxurious product for them. Meanwhile, tea culture has existed in China for thousands of years and Chinese people were known for their preference for drinking tea in daily life and on significant occasions as well. As a consequence, the company suffered a tremendous loss of money in China in its first nine years.
In order to secure success in Chinese market and the loyalty of Chinese consumers, Starbucks carried out a careful and meticulous market study. The study demonstrated that the Chinese middle class, the target customers of Starbucks, was on the rise, as economic growth in China was in full swing. Therefore, Starbucks decided to capitalize on the emergence of Chinese middle class who pursued upscale goods and high-quality services.
To begin with, Starbucks launched a menu of beverages and snacks that were tailored to local tastes. For example, Starbucks introduced green tea frappuccino and black tea latte into its menu of beverages while moon-cake and red bean oats scone into its menu of desserts (Red bean is a common Chinese cooking ingredient used in a wide range of food, especially dessert). The tea beverages showed the deep respect of Starbucks for the tea-drinking culture of Chinese consumers and have thus enjoyed great popularity among them, which played an essential role in the victory of Starbucks in China. As China is quite a large country that is divided into four regions, that is, the north, the south, the east and the west, the tastes and preferences differ hugely between these four regions. To provide beverage and desserts of local flavors, Starbucks worked in collaboration with regional partners. In the northern area, Starbucks established a joint-venture with Beijing Mei Da company. In the eastern region, a partnership was put in place between Starbucks and the Taiwan-based Uni-president while in the south, Maxim's Caterers, based in Hong Kong, was selected by Starbucks as its dim-sum provider.
In the meantime, Starbucks is dedicated to providing Chinese customers with an unparalleled experience. Since its inception, Starbucks has positioned itself as the “third place” between home and workplace for its worldwide operations. In addition to the stylish interior, comfortable lounge chairs and upbeat music, Starbucks rendered Chinese consumers an exceptional experience that was entirely different from that in the United States. As the rapid development of digital technology is underway in China, Chinese society has entered into a cash-free era. Chinese consumers utilize digital applications such as Alipay and Wechatpay to fulfill all kinds of payments. To attract highly digitized Chinese customers, all the outlets of Starbucks in China have put in place digital transaction payment terminals. At the same time, the digital service of mobile ordering, paying and delivering has grown quickly in China. In order to offer Chinese customers digital experience of mobile ordering, paying and delivering, Starbucks has unveiled Mobile Order & Pay and Starbucks Delivers in its outlets in China. To maintain its position as a coffee brand leader in China, Starbucks is set to make continuous efforts to build its digital capabilities and offerings to live up to the expectations of Chinese customers.
Starbucks also partnered with Chinese social media companies to launch its advertising and promotion campaign. On Wechat, a leading socializing application with over 500 million users, Starbucks socially interacts with its Chinese customers. Starbucks has also launched its advertising and promotion campaign on Weibo, one of the biggest social media platforms in China. In addition, the coffee company established a partnership with Alibaba, the world’s largest retailer and e-commerce company, to set up its e-commerce site on the Alibaba platform.
A series of multinational brands have failed to integrate the complicated Chinese market. Nevertheless, Starbucks has succeeded in plugging into the Chinese market and gaining the loyalty of Chinese customers. China is now Starbucks’ fastest growing market in the world. According to the company’s China CEO, Belinda Wong, Starbucks is opening one store in China every 15 hours. With exponential growth, China is projected to surpass the United States to become the largest market of Starbucks in the near future.
Bibliography:
1. Angelica LaVito.Tuesday, Dec 5, 2017. Starbucks is opening a store in China every 15 hours. CNBC. https://www.cnbc.com/2017/12/05/starbucks-is-opening-a-store-in-china-every-15-hours.html
2.Helen.H.Wang.Aug 10, 2012. Five Things Starbucks Did to Get China Right.Forbes. https://www.forbes.com/sites/helenwang/2012/08/10/five-things-starbucks-did-to-get-china-right/#34c6a07053af
3.Lisa Fu. May 18, 2018. The Starbucks experience in China is way different than in the US(SBUX).MarketsInsider.2018. https://markets.businessinsider.com/news/stocks/china-starbucks-experience-different-than-us-2018-5-1025018280
4. Shaun Rein.CNBC Feb 13, 2012.Why Starbucks Succeeds In China. Business Insider.
5. Taylor Butch.July 04, 2016.How Does Starbucks Succeed in China?.The Diplomat.2016.https://thediplomat.com/2016/07/how-does-starbucks-succeed-in-china/
6.Yang Chengxi and Ding Yi.July 27, 2018.The Starbucks success story in China following 9 profitless years. CGTN. https://news.cgtn.com/news/3d3d414f3367444d79457a6333566d54/share_p.html
6.Yang Chengxi and Ding Yi.July 27, 2018.The Starbucks success story in China following 9 profitless years. CGTN. https://news.cgtn.com/news/3d3d414f3367444d79457a6333566d54/share_p.html
7. Starbucks’Stories&News.July 12, 2019. Starbucks Unveils Express Retail Store Experience in Beijing-Starbucks Now. https://stories.starbucks.com/press/2019/starbucks-unveils-express-retail-store-experience-in-beijing-starbucks-now/
8. Starbucks’ menus in China.https://www.starbucks.com.cn/en/menu/
Lin Xinmin
Hi,
ReplyDeleteThank you for your interesting post.
You pointed out that Starbucks enjoys a great success in China, which is not easy to have even for multinational brands owing to the specificity of the Chinese market. I heard that Lunckin Coffee, a Pekin-based start-up which has copied Starbucks' concept, is forecast to have more shops than Starbucks by the end of 2019. Do you know which brand is preferred by Chinese people ? Is Lunckin Coffee a serious competitor ?
Moreover, knowing that there are some tensions between the Chinese and the American Governments, can Starbucks popularity suffer ?
Amin R.
Thank you for your reading. Currently, Starbucks has several competitors in China, namely, Costa Coffee, Luckin Coffee, McCafe and Pacific Coffee. McCafe has price advantage over Starbuck, but it has losed ground in the competition with Starbucks. With the exponential growth of Chinese middle class, they prefer upscale products. Therefore, Strabucks enjoys great popularity among them. Pacific Coffee is a HongKong-based coffee brand and its market share accounts for only a small part of that of Starbucks. Costa Coffee, the UK-based coffee chain, was once the second largest coffee brand in China and Starbucks' biggest rival in China. However, it lags behind Luckin Coffee in terms of technology. Luckin Coffee is now the biggest rival of Starbucks in China. It needs to point out that most of the products provided in Costa Coffee, Pacific Coffee and Starbucks are quite the same. The advanatge of Luckin Coffee is that it is digitally savvy and it has its own application. Customers can use its application to order and pay a coffee. Besides, it has its pickup and delivery service. Cusotmer can choose a store nearby on the application and order the service they prefer. For pickup customers, it only takes three minutes for their coffee to be done. For delivery customers, their coffee can be delivered in about half an hour. The service is quite convenient and is also highly appreciated by Chinese people. Since its inception, Luckin Coffee is making huge efforts to catch up with Starbucks and in my opinion, Luckin Coffee will surpass Starbucks in the near future because it is quite popular among the younger generation. The trade war between the US and China, to some extent, does not exert any influence on the operaion of Starbucks in China.
DeleteHello,
ReplyDeleteThank you for your article it was interesting. Considering that Starbucks has adapted its products to different regions of China, don't you think people within China don't have the same image of this brand ?
Moreover, do you think that Starbucks' success is due to this adaptation ?
Thank you in advance for your answer,
Anaïs P.
Thank you for your reading. Starbucks' success in China is mainly due to its adaptation to the Chinese market. Despite the fact that Starbucks makes different adaptations to different regions of China, the brand image is quite the same among Chinese customers regardless of the region they come from. Another factor that plays an essential role in its victory in China is the exponential growth of middle class who pursue high-end products and upscale service.
Delete