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Luckin vs Starbucks: A fierce
technological warfare fits in a cup of
coffee
Luckin and Starbucks are involved in a massive battle to win
"king" in the Chinese market.
Starbucks has become a leading brand in China since opening its
first branch at the World Trade Center in Beijing in January 1999.
However, its two decades of dominating the Chinese coffee
market seem to have come to an end.
In recent months, Starbucks has caused many investors and
industry experts to worry about the gloomy business situation in
China. It can be said that Luckin Coffee is one of the main reasons
leading to this situation. This is a young technology coffee startup
that has opened more than 2,000 stores across 30 billion-nation
cities in just 14 months of operation and became a "unicorn"
startup worth over $ 1 billion in July last year.
China is Starbucks' second largest market, behind the US, with a
chain of 3,600 stores in 150 cities. However, it took nearly 13
years for the company to reach Luckin's current scale.
Another remarkable thing is that Luckin has absolutely no
intention of stopping there with the goal of reaching 4,500 stores
across China later this year. As of 11/2018, Luckin is valued at
around US $ 2 billion and is likely to continue to increase in the
near future.
Luckin is trying to develop a mass coffee brand that can bring
working experience to the working class at a very competitive
price. According to experts, Luckin has three differences in the
business model to help the company achieve initial unbelievable
success: Luckin application, delivery policy and competitive
prices.
Luckin application
Perhaps one thing that is difficult to understand for visitors to
China or Luckin's first customers is that they are forced to use the
app to buy coffee at the store or delivered to the place because
the company completely disapproves of the bar. payment in cash.
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In return, customers will receive a free drink after downloading
the application.
Although it is quite inconvenient for people from other places to
come, this is a feature that attracts a lot of Chinese consumers,
who tend to prefer online payments rather than cash.
In the context of increasing US-China trade war, Luckin has
another unique competitive advantage: As a true Chinese coffee
brand, owned by Chinese people and built separately. for the
taste of the Chinese people. If these tensions get worse, it is very
likely that Luckin will strike patriotism to develop its brand.
Fast delivery
The majority of Luckin's shops have no seats but only a place for
customers to wait and bring drinks. In addition, nearly half of
them only focused on preparing drinks for Luckin's drivers to
deliver to the door.
Thanks to this efficient distribution system, customers can
receive drinks quickly with the average time stated by Luckin at
18 minutes and no more than 30 minutes. Luckin's impressive
delivery capabilities have helped them maintain convenience and
attractiveness, especially among young people. Another benefit
of this model is to allow Luckin to set up stores in places that are
not too crowded, thereby saving the cost of renting premises.
Price policy
In addition to delivery policy, the most striking difference
between Luckin and Starbucks is the price. While Starbucks
usually charges at least 5.1 USD for most of its coffee drinks, the
price at Luckin is only about 2.95 USD to 3.6 USD plus 0.8 USD for
delivery.
Luckin also often offers programs to reduce product prices to only
$ 1.5, the price of no competitors can keep up. Although the
exact price of a Luckin brand cup of coffee fluctuates significantly
due to promotion, customers still feel much better when they pay
30% to 40% less than Starbucks drink. Besides, the company also
has an attractive bonus mode for users to introduce their friends
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using Luckin application.
Luckin's three different factors have drawn strong attention to
young Chinese customers and office workers in cities with
growing demand for a cheaper and more convenient coffee
brand.
As for Starbucks, it seems that they are facing disadvantages of
competing with Luckin. Although the company also has an
application developed for the Chinese market, it is not as eye-
catching and well-developed as Luckin.
Although it is possible to use resources to develop applications
and distribution systems more efficiently, perhaps Starbucks has
lagged far behind Luckin by ignoring two major retail trends in
China in recent years. From the leading position, the company is
now considered an inconvenient choice for customers who need
to save time. Furthermore, after nearly two decades of building
the company's image as a premium brand for China's emerging
middle class, Starbucks has been unable to cut prices deep
enough to compete at a price that cannot be "better". of
opponent Luckin.
Some experts said that because they cannot compete with
Luckin, Starbucks will maintain the brand "luxury". Luckin has
become a popular choice of working-class coffee drinkers but has
not attracted the attention of the higher-end market.
Many industry insiders pointed out that Luckin's delivery model
does not give customers a "luxurious" experience while sitting in
a beautiful cafe and enjoying drinks right there. Therefore,
although concerns about market share are declining, Starbucks
executives have absolutely reason to believe that the company is
still the first choice of customers who want a true coffee
experience.
