Dive Brief:
- Starbucks is expanding its partnership with Chinese e-commerce giant Alibaba to pilot a delivery service, create delivery kitchens and develop virtual Starbuck stores, according to a news release.
- Starbucks will work with Alibaba-owned on-demand food platform Ele.me, which has more than 3 million delivery riders, on the delivery program. The effort kicks off in September with 150 stories in Beijing and Shanghai, and there are plans to expand it to more than 2,000 stores in 30 cities by the end of 2018. The coffee store chain will also partner with Hema supermarkets to create “Starbucks Delivery Kitchens” in certain locations in Shanghai and Hangzhou, also starting in September with plans to expand.
- Alibaba is creating an online management hub to integrate and deliver consistent Starbucks experiences across digital platforms. Consumers will be able to access a “one-stop” experience that allows them to purchase merchandise online, purchase beverages for delivery or send gifts. Starbucks will also integrate its Rewards membership program.
Dive Insight:
Starbucks and Alibaba continue to be at the forefront of merging digital and physical retail to create value-add services for customers, driving sales and loyalty. The Starbucks-Alibaba partnership will help both brands reach China’s growing middle class and its increasing spending power. The food delivery market has exploded in China, and Starbucks aims to build deeper relationships with consumers through its delivery service and delivery kitchens to further its growth. While Starbucks' sales have been lackluster in the U.S., about 15% of Starbucks’ revenue, which makes up about $3.2 billion, came from China and the Asia Pacific markets in fiscal 2017, according to Bloomberg. Starbucks continues to grow its digital footprint in China, which is the coffee chain’s fastest-growing market.
Alibaba has embarked on a “New Retail” marketing strategy that combines aspects of online shopping, like fast delivery, easy payments and streamlined browsing, with customer service that is offered in brick-and-mortar stores. Last month, the e-commerce company announced plans to invest $2.23 billion in outdoor digital ad company Focus Media, which says it reaches 200 million middle class consumers, and plans to grow its reach.
Starbucks has recently partnered with Alibaba on other tech-focused initiatives in China. In May, the company launched the “Say it with Starbucks” social gifting feature with Alibaba, and added an augmented reality experience at the Starbucks Reserve Roastery in Shanghai. Starbucks has seen the number of loyalty members in China who have been active in the past 90 days, almost triple over the past four years. Sixty percent of Starbucks sales in China come from digital payments, and 80% of sales are cashless.
