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Delivered hot: Starbucks bets on Alibaba tie-up to revive China sales

 
In June, Starbucks noted that it achieved such a link after reporting a sharp slowdown in sales growth in China, which was partially blamed for suppressing third-party suppliers that previously helped manage orders in their cafes.


"I believe that this strategic partnership will be ... it will be just rocket fuel for Starbucks growth and the continuation of expansion in China," said Starbucks CEO Kevin Johnson to journalists in Shanghai on Thursday.


The Seattle company will pilot delivery services from 150 Starbucks stores in Beijing and Shanghai and plans to expand it to more than 2,000 stores in 30 cities by the end of the year, according to Starbucks and Alibaba in a joint statement.
Starbucks expects to begin to see some benefits of partnership in the next quarter and full impact in 2019, Johnson said.


The companies will cooperate between Alibaba companies, including Ele.me delivery platform, Hema supermarket chain, Tmall and Taobao online stores, as well as the mobile and online Alipay payment platform. They said that Starbucks will also open a virtual store on Alibaba platforms where customers can buy Starbucks products.


The delivery program will involve 3 million registered drivers Ele.me in order to deliver orders within half an hour. Starbucks will install Starbucks Delivery Kitchens inside Hema stores and will use the supermarket delivery system to fulfill Starbucks' order bookings.


Starbucks did not have an official online delivery in China before this deal.


Instead, unapproved third-party delivery services filled this gap by collecting massive orders for their own customers. Analysts say that an official delivery agreement will raise costs for Starbucks.
Starbucks said that its delivery menu will contain only those items that can match its half hour, but have not indicated whether it will charge for the supplies. His pilot delivery program in Manhattan and Seattle was alienated several years ago partly because she paid too much: $ 5.99 for shipping.


Luckin Coffee, a local start-up that wants to keep up with Starbucks, takes less than $ 1 per order and said its shipments took an average of 18 minutes.


Starbucks and Alibaba did not provide financial data on the partnership and refused to say whether the company discussed the issue of participation in the capital.


Some parts of the agreement, including those related to Ele.me, were exclusive, and others were not, Starbucks executives said. According to the companies, the partnership has been discussed for more than a year.
In recent years, China has been offering rich collections of Starbucks thanks to a thriving cafe culture that has helped offset saturation in the United States. The country has 3,400 stores, and by 2022 it is planned to double this figure.


But there is pressure from local companies such as Luckin, which are expanding rapidly and offering cheap shipping, online ordering, large discounts and premium payments for their employees.


Luckin said that on Wednesday it was planned to double the number of stores in China to 2,000 by the end of 2018.


Johnson acknowledged the competition, but added that a significant opportunity in China has made this unsurprising.


The transition of Starbucks to the delivery of services "depends in part on the fact that they do not lag behind Luckin Coffee in terms of providing high-quality delivery services" to a group of young office workers who do not want to stand in line, said Ben Cavender, an analyst at China Market Research Group.
The partnership is also a novelty for Ele.me in the race for a market share in the Chinese supply market against Meituan-Dianping, which is supported by the gaming giant Tencent Holdings (0700.HK).


Last week, Ele.me said it would spend more on subsidies at a time when Meituan is preparing for the listing of Hong Kong at $ 4 billion.




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