Starbucks Ramps Up its Mobile Delivery Services…in China

It may be hard to believe, but reports note that Starbucks has actually been hit with a sales slump in China. While in the US, it’s expanding its operations like no tomorrow and building outlets in places that previously might never have seen an outlet before, it’s not faring so well in China. Quarterly sales were down a hefty two percent, and given that the same time last year it was seeing seven percent growth, clearly something needs to be done. Thus, new reports put Starbucks and Alibaba working together to push coffee delivery.

Delivery might be key to turning things around; reports suggest that Starbucks was blaming much of that sales slump on its previous connections to third-party delivery. There was also a hit in third-party operations that placed orders for delivery; while these helped drive sales, they also boosted lines inside stores themselves, which may have hurt sales in a different direction.

Throw in growing competition from firms like Luckin Coffee—already up to 660 locations since opening in January—and even Starbucks’ vast name recognition may not be enough to help.

That’s why Starbucks is said to be looking into its own delivery options, specifically, with a little help from familiar name Ele.me, which is part of Alibaba’s overall operations. Given that Starbucks is out to double its total storefronts in the country, it will need a solid market to sell into, not one that’s on the decline. This may be helpful, though, especially since mobile ordering is likely to follow an announcement of delivery, based on word from William Blair analyst Sharon Zackfia.

Starbucks has already shown the kind of impact that mobile ordering can have on a business’ fortunes; it’s used mobile ordering to great effect already, to the point that it’s actually hurt itself to a degree by having so many mobile orders come in that it couldn’t take care of orders at the counter with any timeliness.

It might be exactly the kind of thing Starbucks needs to better take on the Chinese market, especially given the Chinese fondness for mobile payments. Only time will tell how well it works, but if it works anywhere near as well there as it did in the US, then the Chinese coffee market is in for a real shakeup.