Why can Starbucks succeed in China?

The article on the Chinese website of the United States on February 12, the original question: why can Starbucks succeed in China? Ryan, a reporter for NBC Financial Channel, said that 14 years ago he met an entrepreneur who wanted to open a cafe in China. He believes that Chinese people will not replace their tea drinking culture with expensive drinks. But Starbucks' success in China has proved itself wrong.

Starbucks CEO Schultz announced that China will soon become the largest market outside the United States. Starbucks has set up 500 cafes in China, each of which is even more profitable than its American counterparts, although the average sales volume is lower than the latter.

Starbucks has been successful in the Chinese market, while many Western food and beverage companies, including Donndole, four Seasons and Burger King, failed to meet initial expectations, USA Today said. Starbucks provides an example for brand-name food companies to succeed in the face of rising labor costs, rising real estate rents and fierce market competition.

Instead of copying similar products popular in the US market to China, Starbucks is developing new products that suit local tastes, such as green tea-flavored coffee. Starbucks does not force takeout, but adapts to the habit of local consumers who like to sit down and drink in cafes.

In the late 1990s, when Chinese restaurants were less air-conditioned, Starbucks provided a good place for company executives and friends to get together through a comfortable environment. In other words, Starbucks adapts its business model to Chinese habits, rather than moving everything in the United States to China. The copying of everything by companies such as Best Buy and Home Depot proved to be short-sighted and ineffective.

The challenge for those spacious and comfortable cafes is that the average income per square meter of business area is much lower than that of American takeout facilities. Starbucks chief financial officer Ostad says sales of each cafe in China are only 1/3 to 2/3 of those of its American counterparts.

But Starbucks takes the high-priced route: it costs more per cup of coffee in China than in the United States, and the high price has become a status symbol.

As a result, Starbucks sells less per cafe in China, but is more profitable than its American counterparts. Across Asia, Starbucks' operating profit margin for 2011 was 34.6%, compared with 21.8% in the United States. Too many brands cut prices in order to compete for market share. But in reality, they should increase their profit margins.

At the same time, Starbucks has great skills in recruiting, retaining and training employees. Job-hopping rates of more than 30% a year are common in China. But Starbucks has a much lower job-hopping rate because it offers better pay, working environment and career.

USA Today says many multinationals treat Chinese employees as second-class citizens and care little about their careers. Most of their management are foreigners or overseas Chinese, and few are really locals. But Starbucks employees say they feel that the company's executives really care about them.

Starbucks' service is equivalent to a five-star hotel. Of the hundreds of customers interviewed in Shanghai, most said they liked other coffee in terms of taste, but would continue to go to Starbucks because of the good service.

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