Internet & Tech

Caffeine rush

Starbucks looks for a coffee-centric edge from China’s delivery industry


Delivering to an office near you...

When Starbucks first opened its doors in 1971, it sold coffee beans. The fashion for drinking coffee outside your own home wasn’t widespread in the United States. It was only on a trip to Italy in 1983 that Starbucks founder Howard Schultz was inspired to export the idea of baristas serving the beverage to customers in his Seattle hometown.

When Starbucks came to China in 1999 they found a society already receptive to the notion of relaxing with a hot drink. But the greater challenge was making coffee the beverage of choice, rather than tea.

Starbucks was able to capitalise on its prestige as an international brand and its green mermaid logo soon became a status symbol for the growing xiaozi class: young, white- collar workers, often with small apartments and demanding jobs, who were starting to spend on smaller luxuries.

Starbucks drew this demographic into what it referred to as a “third space” – a comfortable, accessible environment that was neither the home nor the office.

But thanks to the growth of China’s online delivery firms, more office workers are starting to have their coffee brought back to their “second space” – the office. Starbucks has encouraged the trend itself through its app, which it has been pushing in China this year, allowing customers to order coffee online and then turn up at a designated store to collect it. For busier and smartphone-obsessed white-collars, the service saves time. But even more convenient is having your coffee delivered directly to you. Starbucks China doesn’t make the delivery itself, but some apps such as CoffeeBox now focus entirely on delivering coffee, while others like Zhulilaiye offer on-demand personal assistants, many of whom specialise in fetching the morning brew. On a busy day, even the newest of the providers are reporting orders for 10,000 cups.

These apps generally charge a Rmb5-12 premium on orders, CBN reports, and they promise delivery within a certain timeframe. If the delivery arrives within the window the deliverer gets a small bonus from the company providing the service. If it is late, they suffer a small deduction. CBN profiled one delivery man who earns Rmb6,000 ($887) a month delivering coffee in Beijing, or about twice what he earned previously as a “head chef” in a third-tier city.

Some of these delivery firms have proved adept at exploiting Starbucks’ business strategies. For example, Starbucks introduced a loyalty card scheme which can make every fourth cup of coffee free. Using this, the coffee couriers can pocket the cost of every fourth cup they deliver.

But a few of the new start-ups may start to lose out as Starbucks gets into delivery itself. China Retail News reports that the firm has already trialled the service in America, and will be extending the pilot to China next year. To do this Starbucks may partner with one of the incumbents in the market, channelling customers through its own app and harvesting the coveted user data that is currently being captured by third parties.

China Business Network says that Starbucks envisages a “fourth space” through this approach – one that is online. Customers can already use the app to order their coffee, make payment, receive rewards and find nearby stores. Incorporating a delivery service seems the logical next step for Schultz.

If the ordering trend continues to grow and more coffee is consumed outside Starbucks premises, the company might want to rethink its store-opening strategy, which has promised a new outlet in China every day for the next five years.

On the other hand, customers will need their Starbucks store reasonably nearby if their Venti Soy Quadruple Shot Latte is going to stay hot during the delivery run.

So perhaps growing the network makes sense after all.

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