It is almost undeniable that when we think coffee shop chain we think of Starbucks. The Seattle based company has managed to become a phenomenon worldwide and has had little competition thanks to its uniform but still tailored approach to coffee (and social media worthy seasonal drinks) but it seems like their supreme reign may be coming to an end, as many people are looking for something different, and that seems to be coming from China. The company Luckin Coffee is still not as well-known, but two locations in Manhattan and they are changing the scene already.
They still would have a very long way to go, as there is a reason why no other chain has overtaken Starbucks in about 40 years, and it is not the quality of the coffee, although that has helped.
The new Starbucks coming straight from China, will they be able to compete?
Luckin Coffee’s history seems familiar when we compare it to the American empire Starbucks, although about 50 years later. Founded in 2017, the coffee shop opened multiple locations in a few short years and was able to survive not just the pandemic, but an additional accounting scandal in 2020 which should have brought the company to its knees. However, they bounced back and were able to overtake Starbucks as the biggest coffee chain in China in 2023 despite being delisted from NASDAQ just three years prior.
Part of this is, of course, glocalization, which is not something that is taken seriously despite it being a massive driving force in the market nowadays. Starbucks attempts to force the American standard everywhere it goes, and while it has been well received thanks to the expansion of American culture, as people get used to the novelty, they begin to crave other things that are closer to home. Local chains then get the opportunity to apply some of the expansion techniques but with a local flavor and suddenly they are thriving.
In the case of Luckin Coffee it also does not hurt that their drinks in China are generally around 30% cheaper than Starbucks. This is managed by using a mobile-app-based store model, which has allowed them to cut costs while maintaining quality, but the model may not translate as well as they hope into the US market.
There are two strikes working against them in this transition to the US market. The first one is that it seems like they will not be able to offer their products at the same price differential than in China, and the fact hat the products will only be marginally cheaper will likely not help them grow as fast as they expect. The second one is that the app model that they operate with is not exactly something they can do in the States, as in New York, cashless businesses have been prohibited since 2020.
While in China the cashier less experience is one of the features of the company, which can make clients feel less awkward, in the US that will not be an option, and the ambiance is not the same. Even so, the app remains central to the company’s U.S. strategy.
In its two New York locations, users have been offered their first beverage for just $1.99 and the chance to win a year’s worth of free coffee through a raffle. Those who downloaded the app ahead of the opening also gained early access to limited-time deals. The company is also taking advantage of their Social Media savviness and have recently opened a new account specifically for the American market where they will undoubtedly publish new trends and discounts for their potential and current customers to benefit from.
Whether or not they will be able to take the throne remains to be seen, but it seems like Starbuck’s competition is here and they plan to fight to stay.