A Look at Chinese Startup Luckin Coffee
Luckin Coffee, a coffee chain which began operations in November 2017 has now opened over 1,400 cafes in 21 cities and is set to conquer the global coffee chain market which is now dominated by Starbucks. A recent fundraising round in June which included Singapore sovereign wealth fund GIC Pte Ltd valued the company at $1 billion dollars. The upcoming round of fundraising is expected to value the company at $1.5 billion to $2 billion, making it one of the fastest growing unicorn of 2018.
Luckin Coffee’s Success
The Beijing-based coffee chain has fast tracked its growth plan by leveraging on online ordering and cheap delivery, deviating from the usual coffee-chain model which emphasizes on creating a quality environment for consumers. 44% of its outlets operates like a ‘takeaway shop’, where the outlet size is smaller and coffee are mainly delivered via its courier.
Luckin’s focus on technology has allowed it to create a unique customer experience while achieving cost savings. Through the Luckin’s app, customers can place an order for delivery or takeaway. Customers are then able to view a livestream of their coffee being made and track its delivery progress. The coffees are currently delivered using SF Express couriers, with an average delivery times of under 30 minutes.
Luckin has also placed huge emphasis on marketing, heavy discounts and referral programs. For instance, first time users of the Luckin app are awarded a free cup of coffee. Free coffees are also given to referrers under their referral program. It also relied on social media such as WeChat to build its community by launching periodic giveaway campaigns. Last but not least, Luckin partnered with key opinion leaders (also known as influencers) such as Tang Wei and Zhang Zhen to target white collar professionals in first-tier cities such as Beijing and Shanghai. Within the first four months of its official launch in January 2018, Luckin Coffee has managed to sell over five million cups of coffee.
Luckin Coffee ‘New Retail’ model has successfully enabled a seamless engagement with their customers both online and offline. Essentially, New Retail is the integration of offline and online channels to create a retail experience that transcends the physical space. The concept of New Retail was emphasized by Jack Ma in his 2017 letter to shareholder: “Commerce as we know it is changing in front of our eyes. E-commerce is rapidly evolving into ‘New Retail’. The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customers”.
Overtaking Starbucks
With the coffee shop market in China worth over $4.5 billion and growing, Luckin Coffee has leveraged on technology, the massive delivery network and a growing preference on coffee to become the second largest coffee chain in China. With the average price of its coffee at approximately two-thirds that of a Starbucks coffee, Luckin has managed to capture the middle-class consumers who are willing to pay for decent quality coffees at reasonable price. As such, it is poised to overtake Starbucks in the Chinese market within the next five years. According to Euromonitor International, Starbucks currently has 3,400 stores and holds 58.6% of the market share in China.Luckin Coffee’s Success
The Beijing-based coffee chain has fast tracked its growth plan by leveraging on online ordering and cheap delivery, deviating from the usual coffee-chain model which emphasizes on creating a quality environment for consumers. 44% of its outlets operates like a ‘takeaway shop’, where the outlet size is smaller and coffee are mainly delivered via its courier.
Luckin’s focus on technology has allowed it to create a unique customer experience while achieving cost savings. Through the Luckin’s app, customers can place an order for delivery or takeaway. Customers are then able to view a livestream of their coffee being made and track its delivery progress. The coffees are currently delivered using SF Express couriers, with an average delivery times of under 30 minutes.
Luckin has also placed huge emphasis on marketing, heavy discounts and referral programs. For instance, first time users of the Luckin app are awarded a free cup of coffee. Free coffees are also given to referrers under their referral program. It also relied on social media such as WeChat to build its community by launching periodic giveaway campaigns. Last but not least, Luckin partnered with key opinion leaders (also known as influencers) such as Tang Wei and Zhang Zhen to target white collar professionals in first-tier cities such as Beijing and Shanghai. Within the first four months of its official launch in January 2018, Luckin Coffee has managed to sell over five million cups of coffee.
Luckin Coffee ‘New Retail’ model has successfully enabled a seamless engagement with their customers both online and offline. Essentially, New Retail is the integration of offline and online channels to create a retail experience that transcends the physical space. The concept of New Retail was emphasized by Jack Ma in his 2017 letter to shareholder: “Commerce as we know it is changing in front of our eyes. E-commerce is rapidly evolving into ‘New Retail’. The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customers”.
Overtaking Starbucks
With the coffee shop market in China worth over $4.5 billion and growing, Luckin Coffee has leveraged on technology, the massive delivery network and a growing preference on coffee to become the second largest coffee chain in China. With the average price of its coffee at approximately two-thirds that of a Starbucks coffee, Luckin has managed to capture the middle-class consumers who are willing to pay for decent quality coffees at reasonable price. As such, it is poised to overtake Starbucks in the Chinese market within the next five years. According to Euromonitor International, Starbucks currently has 3,400 stores and holds 58.6% of the market share in China.
This post was originally posted on Redpulse
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