Star­bucks cof­fee with QR code

Bev­er­age chain jumps on WeChat band­wagon, takes mo­bile pay­ments

China Daily (Hong Kong) - - BUSINESS - By BLOOMBERG

WeChat lets users text friends, post self­ies and pay a gas bill with a smart­phone. From Thurs­day, the block­buster Chi­nese app, known as Weixin Pay in China, has also been used to buy a Java Chip Frap­puc­cino.

Star­bucks Corp said on Thurs­day it will ac­cept the pay­ments sys­tem at about 2,500 of its cafes across China, en­abling cus­tomers to com­plete pur­chases with a scan of their phone. The agree­ment with Ten­cent Hold­ings Ltd means the Seat­tle-based chain joins for­eign re­tail­ers, in­clud­ing KFC, Dis­ney and Uniqlo, in em­brac­ing the cash­less mo­bile pay­ments ubiq­ui­tous in China.

About 200 mil­lion con­sumers use Weixin Pay and Ali­pay, the sys­tem owned by Alibaba Group Hold­ing Ltd’s fi­nan­cial af­fil­i­ate, at phys­i­cal stores be­cause of the ease and speed at which con­sumers can make pur­chases. Some over­seas re­tail­ers have balked at dig­i­tized trans­ac­tions be­cause of costs in­volved in chang­ing pay­ment sys­tems and con­cern that data col­lected could breach cus­tomer pri­vacy.

“Ac­cept­ing mo­bile pay­ment would un­lock mas­sive value for Star­bucks,” said Shaun Rein, man­ag­ing di­rec­tor of China Mar­ket Re­search Group, in an interview. “Since they couldn’t move cus­tomers through the line faster, they were los­ing 5 to 10 per­cent of busi­ness.”

Star­bucks China didn’t im­me­di­ately re­spond to emailed questions on its de­ci­sion to adopt Weixin Pay. Its cafe com­peti­tor Costa Cof­fee be­gan ac­cept­ing mo­bile pay­ments more than a year ago, around the same time as fast food chains McDon­ald’s and KFC.

The an­nounce­ment on Thurs­day is a re­lief for con­sumers like Tong Wei. The 32-year-old in­sur­ance ex­ec­u­tive said he was dis­mayed at the line snaking in front of a Star­bucks out­let last week in cen­tral Shang­hai’s Lu­ji­azui busi­ness dis­trict.

“The lines are al­ways very long at Star­bucks be­cause peo­ple take so long to pay,” he said. “If there was an­other op­tion nearby, I wouldn’t come here any­more.”

It was a com­mon com­plaint in China, where mo­bile pay­ment is a big deal. Four out of 10 con­sumers use mo­bile phones to pay at phys­i­cal re­tail stores and restau­rants, ac­cord­ing to re­search firm Emar­keter, which fore­casts that the pro­por­tion will soon rise to half.

Many con­sumers in China, es­pe­cially those un­der 30, don’t bring any­thing but their phones when they go out to lunch or shop­ping.

“It’s a re­al­ity you can’t ig­nore,” said Chris Reit­er­mann, chief ex­ec­u­tive of­fi­cer of Ogilvy & Mather China. “Mo­bile pay­ment is so big and so in­flu­en­tial that you can­not not be part of it. I’m very sure that there’s no re­tailer in six months in China that can af­ford not to ac­cept it (mo­bile pay­ment) — it’s just too big.”

With Star­bucks hav­ing ca­pit­u­lated, fash­ion chain H&M of Hennes & Mau­ritz AB, which has more than 300 stores across the Chi­nese main­land, leads the pack of hold-outs, which also in­cludes fur­ni­ture store Ikea and Nes­tle SA’s cof­fee-ma­chine maker Ne­spresso.

H&M China spokes­woman Stella Zhou said that the com­pany is “look­ing into the mo­bile pay­ment sys­tems, but our fo­cus now is im­prov­ing our own on­line plat­form.” Ikea China’s ex­ter­nal pub­lic re­la­tions spokes­woman Vivi­enne Jia said that it is in the process of con­duct­ing tri­als of mo­bile pay­ments in its main­land stores. Ne­spresso China de­clined to com­ment.

Cost and con­trol are the main con­cerns keep­ing for­eign con­sumer com­pa­nies in China from ac­cept­ing mo­bile pay­ments, an­a­lysts and re­tail­ers said. For for­eign chains, ac­cept­ing Chi­nese mo­bile pay­ment ser­vices usu­ally in­volves an ex­pen­sive up­grade to a point-of-sales sys­tem that can ac­com­mo­date Weixin Pay and Ali­pay while also be­ing com­pat­i­ble with their international sys­tems.

“It’s ac­tu­ally a huge dilemma for for­eign com­pa­nies what sys­tem they can use,” said Ben Wong, a spokesman for Bindo, a point-of-sales sys­tem soft­ware that is com­pat­i­ble lo­cally and in­ter­na­tion­ally. “Na­tive Chi­nese sys­tems are in­com­pat­i­ble with international sys­tems, but if they keep the sys­tems sep­a­rate, there’s too much loss of re­tail data.”

New Zealand-based pre­mium cof­fee chain Fuel Espresso took six months and about 50,000 yuan ($7,300) to ac­com­mo­date Ali­pay in its Shang­hai store, said store man­ager Jovi Chan.

Be­sides hav­ing to con­vince his New Zealand and HongKong-based man­age­ment of the ne­ces­sity of ac­cept­ing mo­bile pay­ments in China, the store also had to con­vert to Bindo’s soft­ware, in­stall bet­ter Wi-Fi and open a Chi­nese main­land cor­po­rate ac­count, among other mea­sures, said Chan.

“It’s a long-term in­vest­ment,” he said. “I felt that if we don’t go in this direc­tion now, there’ ll be a big prob­lem in the fu­ture.”

For gi­ants like Star­bucks, which is open­ing stores in China at the pace of more than one a day, the con­cern was over safe­guard­ing the data of its cus­tomer base, said China Mar­ket Re­search Group’s Rein.

“A lot of chains are con­cerned about too much user­data con­trolled by Alibaba,” he said. “It’s their cus­tomers, but now all the data goes to the mo­bile pay­ment providers. There are con­cerns about con­fi­den­tial­ity.”

Star­bucks had tried to pop­u­lar­ize its own mo­bile pay­ment sys­tem. In July, it launched pre-loaded Star­bucks gift cards for mem­bers to pay via mo­bile de­vices.

Ant Fi­nan­cial, which owns Ali­pay, said that it signs data pro­tec­tion agree­ments with ev­ery mer­chant.

“All the rights to cus­tomer data are in the hands of the mer­chants, and each mer­chant’s data is strictly sep­a­rated,” Ant Fi­nan­cial said in an email.

I’m very sure that there’s no re­tailer in six months in China that can af­ford not to ac­cept it (mo­bile pay­ment) — it’s just too big.” Chris Reit­er­mann, chief ex­ec­u­tive of­fi­cer of Ogilvy & Mather China the num­ber of Star­bucks cafes around China that will ac­cept Weixin Pay the num­ber of con­sumers who use Weixin Pay and Ali­pay at phys­i­cal stores

AP

A Star­bucks staff mem­ber hands out free cof­fee to cus­tomers at an event to mark the 10th an­niver­sary of Star­bucks’ launch in China, at the com­pany’s orig­i­nal out­let in Bei­jing.

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