Starbucks Strikes Back Against Luckin's US Debut – CoffeeTalk

Starbucks is preparing to face the challenge of Luckin Coffee, a Chinese competitor that overtook Starbucks as China’s largest coffee chain by both store count and revenue two years ago. Luckin operates more than 26,000 stores, the majority in mainland China, with more than 41,000 worldwide, including about 7,800 Chinese outlets. Starbucks is now seeking to replicate its success on Starbucks’ home turf with a different operating model.

Luckin requires customers to order drinks through its app, which gathers data on their consumption patterns and offers coupons and discounts for larger orders. The majority of Luckin’s stores in China lack seating, and its two Manhattan stores feature sparse clusters of firm chairs and benches. Mobile and app orders are an important source of business for Starbucks, accounting for 31% of its US transactions. Under CEO Brian Niccol, the Seattle-based company is spending about $150,000 per store to remodel the decor and add more comfortable seats in an effort to restore its allure as a relaxing place to enjoy coffee and drinks with companions.

Henry Barklam, a software engineer who was returning to the Greenwich Village Luckin to take advantage of the deals, said he found neither outlet an appealing place to spend time. Last week, Niccol announced that Starbucks would “sunset” between 80-90 mobile stores designed solely for picking up mobile orders, with no seating. Starbucks will continue to serve all customers whether they ordered in person, at drive-through windows, or on its app.

Foot traffic data gathered by Advan Research showed that Starbucks’ efforts to make stores more welcoming were having an impact: visits from customers who stayed for at least 30 minutes were up about 5% year on year in the three months to June. Starbucks is segmenting itself into two separate parts: the highly transactional, app-based, don’t linger, grab-and-go segment and the one where customers are visiting the place to experience the atmosphere. Sidewalk signs outside Luckin’s two Manhattan stores displayed a QR code to download its app last week, touting $1.99 beverages for new customers.

Luckin’s Broadway store is a block from Astor Place, where two Starbucks cafés once stood 250 feet from each other before closing. Its other New York location on Sixth Avenue is half a block from a Starbucks that continues to operate.

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