On 2 August Starbucks and Alibaba hosted a press conference to announce their collaborative partnership moving forward.
For decades Starbucks has stood atop the pecking order in China undisturbed by the comings and goings of coffee houses and tea shops squabbling below them. Yet as widely documented, the once smooth sailing turned somewhat turbulent in 2018. Namely the arrival of a worthy competitor in the form of Luckin Coffee and their delivery-focused approach, accusations of monopolistic tactics to influence commercial landlords and suppliers, and an unheard of decline in sales in the Middle Kingdom stronghold. Now Starbucks has gone full throttle in China, partnering with the omnipotent Alibaba to dissuade any doubters over their place in this market.
The past weeks have seen rumours through to full-blown ‘anonymous’ reports about Starbucks linking up with Alibaba’s now fully-acquired Eleme delivery platform. Last week’s press conference confirmed this, but Daniel Zhang (CEO of Alibaba), Belinda Wong (CEO of Starbucks China) and Kevin Johnson (CEO of Starbucks) made sure to emphasize that this partnership was so much more than just a delivery partner.
Huge, sweeping statements abounded: “This transformational partnership will allow Starbucks and Alibaba to achieve something no tech company or retailer has ever achieved before” and that it will be “the definitive relationship in new retail” were some of the more grandiose soundbites.
And yes, this partnership has the tools and magnitude to find innovative and seamless ways to change how consumers engage with brands and products. This “full marriage” with Alibaba will embrace its entire ecosystem and will operate on three pillars; Eleme delivery, Starbucks delivery kitchens set up in Hema’s experience-driven supermarkets, and a currently vague promise of weaving a digital and personalized experience both on and offline.
The promise of big data honing in on 550m+ active shoppers and integrating touchpoints to provide an unheralded consumer experience is seductive. Yet, the devil is in the details, and just providing ‘convenience’ through a late entry to the delivery game will not push the needle and reinvigorate Starbucks by itself in this market. Starbucks’ strength is in part due to its ubiquity.
The response to the announcement was encapsulated when Belinda Wong proclaimed the reach of the new Eleme delivery service (2000 stores in 34 cities by end of 2018) to expected applause. Instead it was met with an awkward pause and some reluctant praise. A move which seems more like natural progression than inspiring innovation.
It remains to be seen what is in the pipeline on the back of this partnership. The Alibaba-enhanced Reserve Roastery is now a landmark feature in Shanghai and famously pulled in more than $64,000 a day after 2 months in operation, over twice what the average US store does in a week. If Starbucks can bring the dynamism and experience the average customer felt here into the run of the mill coffee experience or online purchase, then they are in good stead.
After all, the average consumer has less than 5 cups of coffee a year in China, compared to the US market’s 250. This partnership forms a foundation for the long road ahead in tapping into that incoming growth. At the moment the tangibles are underwhelming, but the promise is there and the scene is set to see some novel and inspired consumer engagement going forward.