It has now been officially announced that Starbucks has joined hands with Alibaba in order to maintain and grow its dominancy in the Chinese market.
Once China was a very attractive and lucrative market for the U.S coffee giant but recently the company was finding it difficult to maintain its growth and expansion in the Chinese market. Facing rivalry from a billion dollar startup Luckin coffee and fall in the Q3 raised an alarm for the U.S coffee giant.
Within one year, the rivalry company Luckin has shown a good potential and it has also been able to raise $200 million from investors. The company also has 500 outlets all over China and it has also given the facility of mobile payments and orders.
This feature is a perfect match for the country’s current mobile trend and that’s how Luckin has been able to attract both customers and investors. There are also deep discounts given on the Luckin coffee in order to grab more customers.
In response to its rival, Starbucks is revamping its retail strategy by making Alibaba as their partner. This partnership is being viewed as a wide range partnership as it will cover delivery, a virtual store and a strong collaboration on Alibaba’s “new retail” Hema store.
By entering into the delivery game, Starbucks is showing that it still has some cards left under their sleeves. With rare sales decline in the world’s second biggest economy, declining sales figure at home and departure of the leader Howard Schultz, Starbucks is now under immense pressure of performance and revamping the growth in China.
During an interview in Shanghai, the Starbucks chief executive officer Kevin Johnson said “This partnership is going to be rocket fuel for Starbucks’ growth and expansion in China,”
He further added “One of things important to us before we launched delivery was that the experience was integrated with stores, and a premium experience. “This partnership sets the stage not just in China, but for what we will see globally, because the pace of innovation is more rapid here. If we look to a decade from now, this will be our definitive relationship on all things new retail.”
Without disclosing the financial terms, both Alibaba and Starbucks said that they will be investing in the new partnership. The American giant has said that they want to establish themselves as a daily routine for the consumers in China.
After the partnership, Starbucks will start working with Ele.me, which is a $9.5 billion food delivery platform owned by Alibaba. This will allow customer to order and receive Starbucks coffee without visiting the store.
The delivery services will start in the month of September in Beijing and Shanghai with plans to expand in up to 30 cities with 2,000 stores by the end of this year.
The Alibaba CEO Daniel Zhang said that “This is an important validation of the Alibaba’s ecosystem”