The state of Starbucks in Shanghai
Image via WikipediaA minor discourse amid all the crisis talk in China was the position of the erstwhile popular coffee house chain Starbucks. Different regulars noted that business was down and came with different explanations. Rich Brubaker initially blamed the visa-crisis triggered off by the Beijing Olympics. Last week Shaun Rein, who has been telling us that the effects of the economic crisis in China are possibly limited, pointed at the empty stores of Starbucks and said tightfisted foreigners shunned the coffee outlet.That explanation was contested, since much of the clientele at Starbucks is indeed Chinese.
We might now have a better explanation, provided by Spencer Sheehan at the Pacific Epoch, and that fits much more my perception in China: its the competition and an ordinary price war.
On my way to work alone, six new coffee shops have opened during the last three months, and all offer a top-quality Americano for RMB 8, cheaper than Starbucks' RMB 27 equivalent. Three of these shops are run by 85º -- a Taiwanese chain (85ºF being the optimum temperature to brew coffee), but the remaining three are copycat spin-offs with identical prices, products and cups. Competition is intense, and the fight has spilled out onto the street as teams of staff from each shop stalk customers at breakfast-time with cake samples and home delivery leaflets.So, Starbucks is facing at last decent competition and for all the good reasons: they were very much overpriced anyway. Happy New Year for coffee loving Shanghainese!
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posted by Fons Tuinstra at
6:20 PM
2 Comments:
Fons
good to see a nice debate online.
Yes - I initially spoke of the visa situation and its effect on SBUX, but I should be clear in saying that it was the CITIC Starbucks.
I would agree that the falloff has been a result of increased competition - primarily form 85 and Costa - that are bringing better value/ price, however as I have been discussing on All Roads - the Chinese consumers are tightening their belts a lot right now, and that is perhaps the biggest reason.
Something else to keep in mind is that SBUX has over 80 stores in Shanghai now, and not all of them are going to be winners - I was just in the Xujiahui store this afternoon and the line was 10 deep. At the same time, there are 2 new stores at Jiangsu/ Yuyuan that are literally across the street from each other (85 degrees coming soon), and the population is very small so they are never CITIC busy.
Add to that the fact that Illy coffee has been selling ground coffee in a lot of supermarkets these days, and what you basically have is a coffee chain that was once considered a treat become just another coffee shop... and expensive at that.
Happy New Year
R
85c is delicious! It was very interesting to encounter their first store in Shanghai and then in the span of a few months watch them pop up on many a street corner. The fare at 85c is more to the Chinese tastes, but I reckon Starbucks still has the Western image. Starbucks was never really about the coffee (for the locals) anyway, it was about the image of paying for and drinking that coffee.
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