Luckin has been gaining a lot of attention recently thanks to cleverly positioning itself as the plucky young David fighting to unseat the Starbucks goliath in the China coffee market. Except of course, having closed a $200 million funding round that gives it a $1 billion valuation, the company is hardly a little guy at all and has already opened over 500 outlets throughout the country.
In reality, Luckin isn’t competing directly with Starbucks – at least for now – because its pricing is at least twenty percent lower than that of the Seattle behemoth. In addition, close to half of its outlets are more akin to fulfillment centers than retail stores, enabling customers to pick up their cup of joe on the way to the office after ordering it through the Luckin smart phone app or delivering orders directly to people’s offices. As a friend pointed out, “They offer Seven-11 quality coffee at Seven-11 coffee prices.”
Thanks to heavy advertising expenditures and aggressive expansion, the company has made a strong start in the China market. They’ve recently opened an outlet close to the VIA Beijing office, and judging by the number of people I’ve seen toting their distinctive blue cups they appear to be attracting a lot of customers.
The key question isn’t so much whether Luckin will be able to challenge Starbucks for the China Coffee King Crown, but if it will be able to withstand competition from other insurgents enviously eyeing its eye-popping valuation. It’s not as if the barriers to entry are particularly daunting.
Since I’m not a big fan of Starbucks myself, I’ll sit this battle out and watch from the sidelines. The HiCoffee shop that recently opened behind our office provides the perfect vantage point. Excellent coffee from throughout the world and no loud logos on the cups to disturb the friendly and relaxing atmosphere.