With a start-up capital of 1 billion yuan, it will open a total of 500 stores by May-is Luckin Coffee too bold?

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"With 1 billion yuan of start-up capital, a total of 500 stores will be opened by May"_Facing the media, Qian Zhiya, founder and CEO of lucky coffee, launched a bold store expansion plan.

You may not have heard of this emerging coffee chain, but it has opened 56 stores in Beijing and Shanghai only five months after its establishment. Over the next three months, it plans to expand the number of stores nationwide to 500 at a rate of four to five a day.

Many people know that lucky coffee is an advertisement endorsed by Tang Wei and Zhang Zhen. Since November last year, Tang Wei and Zhang Zhen began to appear in Beijing and Shanghai, represented by Chaoyangmen Galaxy SOHO, Wangjing SOHO, Shanghai Bund soho and Shanghai Hongqiao Tianjie.

Tang Wei endorses luckin coffee

Qian Zhiya's positioning for Lucky Coffee is "a typical representative of China's new retail coffee", mainly for professionals and younger generations of consumers, providing coffee products with high sexual ratio suitable for Chinese tastes. Brand blue bottom plus white deer Logo, also shows a young and calm temperament.

As the founder of a coffee brand, Qian Zhiya is a layman. Three months ago, she was the chief operating officer of China's excellent car. In order to create a coffee company that can challenge Starbucks, Qian Zhiya has put a lot of effort into team building and coffee making.

In the current team composition, in addition to her "old partners" who are also from China's excellent car, strong execution and tacit understanding, there are experienced collaborators from the fast-moving, chain catering and Internet marketing industries. The Barista team alone signed three WBC (World Barista Competition) champions. In order to ensure the quality of coffee, lucky coffee uses high-quality Arabica coffee, and the store coffee machine also selects products from the top brands in the industry, SCHAERER and FRANKEE.

"I drink 3 to 5 cups of coffee every day." Qian Zhiya's original intention to open a coffee shop has personal preferences, but it is more optimistic about the prospects of the Chinese coffee market.

According to consulting firm Mintel, sales in China's coffee shop market will grow at a compound annual growth rate of 5.7% between 2017 and 2022, reaching 79.4 billion yuan by 2022, and the number of coffee shops is expected to reach 80,000.

Among them, the average annual growth rate of freshly ground coffee is 40%, and the market space can be expected. However, in Qian Zhiya's view,"the current situation of Chinese coffee is that the price is too expensive and it is inconvenient to buy." Take Starbucks, the most famous in China, for example. A cup of coffee costs about 30 yuan, and many times some consumers give up buying because it is inconvenient to park."

She tried to get lucky coffee to solve these two pain points.

On the one hand, lucky coffee tries to keep coffee prices down, with coffee prices in its stores ranging from 21 yuan to 27 yuan, 10% or more cheaper than Starbucks. Take a large American cup for example, lucky coffee sells for 21 yuan, while other brands basically buy 27 yuan. On the other hand, adopt the strategy of intensive store opening and external distribution to solve the problem of inconvenient purchase.

In order to quickly open a store, lucky coffee not only opens a large store, but also considers a small store with only 40-50 square meters, or even densely distributed around the same business circle. There are 5 luckin coffee stores under preparation near Beijing University of Science and Technology.

APP shows that lucky coffee will open 5 stores around Beijing University of Science and Technology

Different from most coffee chain stores, the modern and simple luckin coffee adopts self-service ordering and cashless mode. Whether it is a store or a takeaway, all consumers must complete ordering and payment through APP. This approach, while saving labor costs and waiting time for customers to arrive at the store, can also collect and feed back data such as customer preferences, consumption periods and hot spots to the background through APP. The analysis of these consumption characteristics will provide basis for new store location and new product development.

Lucky coffee is still in the early stages of promotion, and in order to attract consumers, the brand offers a variety of offers. It includes giving a cup of coffee to users who download lucky coffee APP for the first time; introducing free coffee for new customers; buying 2 get 1 free for all drinks during trial operation period, buying 5 get 5 free (coffee library direct purchase); supporting delivery service within 1.5km of stores (free delivery for more than 35 yuan), etc. In order to guarantee 30-minute delivery, lucky coffee signed a contract with SF Express and provided customers with a "slow compensation" service (customers will be compensated for twice the amount of coffee delivered in more than 30 minutes).

Many consumers who get free drinks refer to luckin coffee as internet coffee or cheap coffee on public reviews, and many new customers come for the spokesperson to taste.

All of this is without financial support. Qian Zhiya revealed that lucky coffee is not short of money, the team's own funds plus angel investment, used to expand stores and education market funds have 1 billion yuan. In April and May of this year, Lucky Coffee will start Series A financing and introduce institutional investors. At present, the 500 stores planned are all direct-sale stores and will not be opened for joining temporarily.

Qian Zhiya is more anxious than money to get target consumers to quickly recognize the brand of Lucky Coffee. In order to enhance brand awareness, the price war in the early stage can not consider gross profit, even negative gross profit can also be accepted. "Starbucks 'gross profit is about 74%, while even if the price of lucky coffee is 21 yuan, it is only reducing the gross profit at present, and there is still profit."

But there are risks behind luckin coffee's aggressive expansion.

Coffee chain expansion monitored by Mintel in 2017 showed a slowdown in market expansion for all leading brands except Starbucks. Among all 10 leading chain brands, Starbucks alone saw a significant increase in the number of stores in 2016, with a net increase of 552 new stores. Other European and American coffee shop brands (including Costa Rica and Pacific Coffee) are growing significantly slower; Taiwanese and Korean coffee shop brands (including Shangdao Coffee and Coffee Companion) are even closing their stores.

Qian Zhiya did not shy away from concerns about possible risks in the rapid expansion of lucky coffee, she said: "The form of lucky coffee stores is relatively diverse, some are big stores, some are small stores." When it comes to the risk of store expansion, these 500 stores are a process of trial and error. As for whether this model is good or not, what is the plan later depends on the effect of these 500 stores."

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