Reuters
- Starbucks is adjusting to Chinese customers who are far more digital than American customers.
- Growth is taking off in China with a new store opening every 15 hours.
- Watch Starbucks trade in real-time here.
Starbucks in China may be more futuristic than what most Americans expect.
"We were struck by how different the Chinese consumer experience is from the US," Jefferies analyst Andy Barish wrote in a note to clients. "Almost all digital needs – social, chat, transport, ecommerce – are consolidated within just a few apps."
In the United States, some still argue that "cash is king," and parts of the country will have pockets of cash-only businesses. In China, cash is a relic of the past. Alipay and WeChat run the market, supporting purchases from street-food vendors to utility payments. As a result, Starbucks will be upping its game to court these highly digitized customers.
With 80% of Starbucks transactions in China being cash-free, the company now has an extra 30 labor hours a week to put towards customer engagement, Barish wrote. It is also pushing more interactive marketing in China with social gifting on WeChat and augmented reality features in stores. The My Starbucks Rewards program has also been a hit in the country with 7 million people paying to be a member and around 90% app usage, he wrote. The next step will be rolling out delivery and mobile order and pay according to Barish.
As emphasized over and over again in the company's second-quarter earnings, dominating China will be key to the coffee chain's long-term strategy. The US market is slowing a bit as evidenced by the 2% comparable sales growth in the last quarter compared to the 4% comparable sales in China. The opportunities will be significant as the country's middle class continues to grow rapidly.
The coffee chain found success in the country by investing in its people and working hard to understand the culture, Barish wrote. Already, a new store opens every 15 hours. By fiscal year 2022, Starbucks intends to up its store count in China to 6,000 from its current 3,300.
Starbucks is down about 1% this year.
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