Starbucks out to revive flagging fortunes
China sales fall as world’s largest coffee chain faces increasing challenge from local brands
retailer’s falling sales and reignite investor interest, Bloomberg reported on Sept 24.
“We must increase the velocity of innovation that is relevant to our customers, inspires our partners, and is meaningful to our business,” Johnson said in a memo. “To accomplish this, we are going to make some significant changes to how we work as leaders in all areas of the company.”
Starbucks’ fiscal results for the quarter that ended on July 1 show that its global store sales increased by 1 percent, but China store sales decreased by 2 percent.
The world’s largest coffee chain hosted its first-ever China Investor Day in Shanghai on May 16, at which the company announced plans to build 600 additional stores annually over the next five years in China — a goal that will double the store count from the end of 2017 to 6,000 in 230 cities by 2022.
Starbucks China launched its delivery services on Sept 19 in Beijing and Shanghai. It plans to expand such services to more than 2,000 stores in 30 cities in the country by the end of the year. More than half of its current Starbucks stores in China will be covered by then.
“Starbucks Delivers” is the first delivery service offered by Starbucks globally. It will be available through both the Starbucks and Ele.me apps. The delivery fee for each order will be 9 yuan ($1.30; 1.10 euros; £1).
Starbucks, which has the majority of the coffee chain market in China, has faced mounting challenges from emerging local coffee brands that have offered delivery services. Luckin Coffee has opened 1,100 stores and has free delivery for items priced above 35 yuan, or 6 yuan for each order under 35 yuan.
Cristina Wang, a senior manager at a major tourism service provider in Beijing’s central business district, says she is looking forward to trying Starbucks’ delivery service but will keep most of her purchases in stores, since she believes the delivery fee is quite high if orders are placed on a daily basis. “Starbucks coffee is already pricey compared with other brands,” says Wang. “Adding 9 yuan for each order only makes it even more unaffordable.”
Zhu Danpeng, an independent analyst specializing in the food and beverage sector, says, “Though the new delivery services will help Starbucks to catch up with peers in the delivery sector, its core competence could be weakened by its pricey delivery fee.”
Starbucks Corp employees prepare coffee at a news conference in Shanghai on Aug 2. Starbucks is joining forces with Alibaba Group Holding Ltd to begin delivering its drinks and baked goods in China, rolling out an effort to stave off competitors and turn around sales in the country.