Anti-Starbucks Luckin Coffee's money-burning mode is not expected. Can Luckin Coffee join?

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Global coffee chain giant Starbucks (Starbucks) entered the mainland market for nearly 20 years, has become the market leader, but now the local industry wants to use the power of the Internet to compete with it.

The potential of the mainland coffee consumption market is huge, with the global coffee consumption growing by only 2% in 2017, while the mainland's coffee consumption growth rate is as high as 15%, Xinhua reported. However, the market has always been monopolized by Western brands such as Starbucks. Local industry has been struggling to survive in the gap.

But at a time when the coffee market in mainland first-and second-tier cities was almost occupied by outsiders, with the help of the mobile Internet and capital, local coffee brands began to fight back. For example, Luckin Coffee started with 1 billion yuan (the same below) and sold 5 million cups of coffee in just four months through subsidized marketing. As of May, the number of offline stores exceeded 500.

Not only that, Luckin Coffee began to "poach" from Starbucks at the end of last year, mainly recruiting middle and senior managers, and some job openings offered more than three times the salary of Starbucks counterparts. It is reported that about 1/7 of Starbucks' employees in Beijing have been poached by Ruixing.

The performance of another Internet coffee company, Coffee Wing, also took a turn for the better last year. According to the Coffee Wing Annual report, the company's net profit in 2017 was 9.41 million yuan, an annual increase of 272 percent, reversing a loss of 5.46 million yuan in 2016.

New retail allows local brands to fight back.

Experts point out that unlike traditional coffee shops, the rise of Luckin Coffee and Coffee Wing has something to do with the "new retail" format derived from the Internet. For example, except for the rapid expansion of Luckin Coffee's stores, all stores support mobile ordering and delivery business. An area of 1.5km to 2km around the store promises delivery within 30 minutes, and similar products are much cheaper than Starbucks.

Coffee Wing has also shifted its business focus to "new retail". In 2017, the company put forward a "one horizontal and one vertical" strategy, which vertically is the popularization of coffee, that is, offline coffee shops, smart coffee machines and retail coffee beverages and retail goods.

Horizontal refers to the offline brand chain stores with coffee and light catering as various modes. At present, the smart coffee machine has become the main source of income for Coffee Wing.

However, the report mentioned that compared with Starbucks and other foreign companies making a lot of money in the mainland market and opening more and more stores, the mainland coffee market has never been able to produce a "unicorn" of a local brand, due to profit, management, and other reasons. the enthusiasm of the capital market for the coffee industry has never been too high.

The money-burning mode is difficult to operate for a long time.

Xiao Sun, who works in the financial circle in Shenzhen, was one of the first users of Luckin Coffee. The reason why he bought Luckin Coffee was mainly because he had buy one get one free coupons, and the price was lower than that of Starbucks, but there was still a big gap between Luckin Coffee's taste and Starbucks. "at the beginning, many of my friends were attracted by a flood of advertisements to download Lucky's APP, but not many people actually bought it, and many people stopped paying attention after the coupons were used up," she said. "

Experts pointed out that as the representative of Internet coffee, whether Luckin Coffee, even Coffee or Coffee Wing, all adopt the Internet model: first do large-scale, seize the market, and then try to make a profit. For example, users are subsidized by "money-burning" games on the Internet, including "free first cup for new users", "customers get another cup of coffee", "buy five get five free" and so on. there are elevator advertisements, celebrity endorsements, Wechat moments ads, and social media marketing, basically focusing on cost-effective.

In contrast, foreign companies have a long culture and business philosophy in coffee monopoly. For example, Starbucks has a very good training system, and each new employee needs to attend two months of coffee making training. And different from other enterprises, Starbucks has always stressed the importance of "people" and believes that employees play an important role in the process of brand communication.

With regard to these advantages, apart from learning to apply new technology to promote business, local businessmen on the mainland actually have many business "eyebrows" that need to learn from foreign companies.