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Starbucks launches in-store pickup in China

Starbucks Corp. said May 22 that it has launched the mobile-order-and-pay feature on its app for Chinese mobile users, in a nod to competition from the newly listed Chinese startup Luckin Coffee Inc. which mainly operates on the mobile order and delivery model.

Starbucks Now is available to members of its Starbucks Rewards loyalty program and can be used at around 300 stores in Beijing and Shanghai. It plans to launch the service across China through 2020.

Purchases made via the feature will allow members to accumulate "stars" which they can use to redeem for free food and drinks later.

John Culver, group president of international, channel development and global coffee and tea, confirmed in a April 26 earnings call the rollout of this service in China by the end of the fiscal year, in response to an analyst asking about potential for growth transitions in the Chinese market.

Culver said the mobile-order-and-pay option would be key to Starbucks' plan to increase its digital footprint in China. He also mentioned that loyalty members represented more than 50% of store transactions in China. The Seattle-based coffee chain has an ongoing collaboration with Alibaba Group Holding Ltd., which includes a virtual store on the latter's Tmall platform and a delivery service by the platform owned by the Chinese e-commerce giant.

Starbucks has identified China as a long-term growth market. Its comparable sales in the country rose 3% year over year for the second quarter ended March 31, 2019, while its store count grew by 17% from 3,236 in the last fiscal year to 3,789 as of March 31.

Meanwhile, prior to its listing, Luckin Coffee had announced an ambitious plan to overtake Starbucks with its store-opening spree. The young brand has opened 2,370 stores in a little less than two years since being founded, and aims to open 2,500 stores in 2019. Shares of Luckin Coffee had, however, fallen to $14.75 on May 22, below its IPO price of $17 when it debuted May 17.