In 1971, a coffee shop opened in Seattle that would be the original iteration of what later became a global coffee brand and international franchise juggernaut: Starbucks. Ever since it started opening locations outside the United States in 1997, Starbucks grew steadily and seemingly unstoppable, until the sight of a shop with its distinctive round logo became ubiquitous worldwide, and its venues morphed into a familiar social hangout for many. But this year the Starbucks train seems to be slowing a bit, particularly in its home country and China. The latter however is trying an unorthodox solution: home coffee delivery.
CNN reports that Starbucks Coffee, with its headquarters in Seattle, Washington has formed a partnership in China with tech and online marketplace giant Alibaba, to begin developing a coffee delivery service for its Chinese locations that would bring home-ordered coffee to customers outside the shops. The companies issued a joint statement revealing this initiative this Thursday, August 2. Starbucks president and CEO Kevin Johnson remarked that their surprise team-up with Alibaba, which specializes in business-to-consumer online sales services among many things, “will reshape modern retail, and represents a significant milestone in our efforts to exceed the expectations of Chinese consumers.”
The delivery service, which will be handled by Alibaba for Starbucks, will launch in September for test markets on Beijing and Shanghai. First, Alibaba’s Ele.me food delivery platform will start taking orders for Starbucks coffees and related products. Next, the cities Hema grocery stores will open Starbucks delivery kitchens, where the coffee retailer’s staff will brew Starbucks coffee orders which will then be delivered to customers in nearby addresses. Should the Beijing and Shanghai experimental phase prove sustainable, Starbucks will then extend the delivery service to all its 2,000 locations in no less than 30 Chinese cities at year’s end.
Since it originally opened locations in China, Starbucks has been making a tidy profit. A few months ago, the company revealed plans for a renewed expansion across the coffee-hungry country, only to find its growth slow down by June. One prominent factor for this stall is the rising prominence of local alternative Luckin Coffee, which now has 500 locations open since starting operations in late 2017. Luckin already utilizes the home delivery system that Starbucks recently inked out with Alibaba, and their online partner is Alibaba competitor Tencent, through WeChat.
China is not the only place where Starbucks finds itself suddenly struggling. Due to a similar slump happening in the US, the coffee giant found itself being downgraded by Morgan Stanley, which predicts that its spot of trouble with sales will continue for a while.
Image courtesy of China Daily