Lots of posts all over the internet recently about the announcement by Starbucks that they will be opening their 1000th store in China by the end of 2013. Quite an amazing feat I might add!
Starbucks entered the China market conservatively at first with franchisees in Shanghai and Beijing, both operated by overseas Taiwan nationals. When they grew to sufficient size Starbucks bought them out as well as the partner in Guangdong Province.
Is the Starbucks strategy in China that different from other emerging markets in Asia? Not really. They are selling a place to hang out and chat or do business. Are customers coming because they love the coffee and the food? Not likely. At the end of the day, it is cheaper to rent a couch at Starbucks than at a 5 star hotel lobby. Many customers want a frappuccino so the drink will last longer than a hot tea or coffee. In stores I have visited in Tier 2 cities like Nanjing, customers often stay 3-4 hours at a time. Young high school girls have their own Starbucks but at cheaper prices – KFC and McDonald’s. It is common to see the students enjoying a soft ice cream while doing their homework in Beijing or Bangkok.
Residents of high stress urban centers need places to relax, meet and do business. Starbucks solves this need. What a great business. Too bad I did not think of it myself! The Chinese love their couches. Ever see a picture of Mao Zedong? He loved couches as much as anybody! He probably would have loved Starbucks too!!