Founder of “new retail” startup Luckin Coffee—whose fast rise has been based on China’s new found love of coffee (and old love of generous subsidies)—has responded to the recent deal of its main rival Starbucks with Alibaba.
Guo Jinyi, co-founder and senior vice president at Luckin, responded to the deal by saying that traditional retail, even with the increased takeaway and mobile payments, is not necessarily new retail since the fundamental business model had not changed, Sina reports.
From the first day, Luckin has used online transactions, big data and other technologies to restructure the underlying logic of its business. It has changed the cost structure and model of traditional retail stores and attached great importance to users’ online experience so that we can scale the market quickly and enable users to drink good coffee at higher cost performance and with better convenience. This is an essential genetic difference: not something that can be changed through ‘external makeovers’ such as delivery, otherwise, it’s just imitating to the point of losing its originality.
China Tech Talk 46: Internet business models disrupt China’s coffee market: Luckin Coffee
This is not the first time Luckin has confronted Starbucks: previously it threatened Starbucks with an unfair competition lawsuit. The new statement has raised eyebrows since the concept of “new retail”—transforming online and offline retail through data and technology—is Alibaba’s own brainchild.
The tech giant signed an agreement with Starbucks on August 2nd which turned out to be much larger in scale than rumors have anticipated. The partnership will cover nearly every key business within the Alibaba ecosystem, including Ele.me, Hema, Tmall, Taobao, and Alipay. The partnership also gives Alibaba access to the data of 7 million Starbucks members, according to a source with knowledge of the matter. The delivery program is expected to expand across 30 cities to more than 2,000 stores by end of 2018.
The partnership will also likely boost Starbucks’ capabilities in tech and data—the prerequisite for any business that wants to put on the popular “new retail” tag. Starbucks President and CEO Kevin Johnson told CNBC that the coffee seller plans to integrate its virtual store into all of the Alibaba Group properties.
“This means that a customer that uses Alipay or Taobao or Tmall or Hema has an integrated Starbucks virtual store similar to the mobile app embedded right into that experience,” Johnson said. “That opens up 500 million or more active users of those apps that will have access to Starbucks.”
After the partnership was made public, Luckin announced it will accelerate its business in light meals and snacks. During its press event on August 1st, the company introduced a price comparison graphic showing competitors’ prices which were highly similar to those of Starbucks.
According to Luckin, by the end of July, the company has set up 809 coffee shops and sold over 18 million cups of coffee in China. Guo Jinyi says the plan is to build 2,000 shops by the end of this year.