china

Starbucks Pushes Christmas in China. But Will Long Lines Threaten Brand?

Posted by Abe Sauer on November 12, 2012 01:12 PM

"Jingle Bells." "Silent Night." Those are just two of the many Christmas songs to be heard on repeat by anyone currently spending more than an hour in a Chinese Starbucks. Unlike in America, many Chinese consumers go to Starbucks specifically to spend more than an hour.

Americans may be gearing up for Thanksgiving but in China's Starbucks, it's already Christmas. From the cups to the signage to the baristas' shirts to the plastic tree with ornaments, there is no "Happy Holidays" war on Christmas in China. There's even a Starbucks China Christmas website. Despite slowdowns in other areas of the nation, China's Starbucks economy is booming and Christmas in China just might deliver shareholders the best present of all.

The "best fourth quarter Starbucks has ever delivered" is what Starbucks chief financial officer told investors during its most recent earnings earnings report; a report that noted a 23 percent year over year increase in quarterly net revenues from its China/Asia Pacific business. No wonder that in the next three years Starbucks plans to add 800 stores and 18,000 employees to its existing stable of 700 China stores.

In one Starbucks at Shanghai's Changfeng Mall just off Suzhou River, the Starbucks Economy is in full view. A little after noon, young, upwardly mobile office workers—China's going middle class—line up 20 deep behind the counter. Almost none of them order simple black coffees. China consumers all get speciality drinks, which causes long waits.

No matter, going to Starbucks is a social experience; it is rare to see any of these customers—dressed trendily in garb from H&M and Uniqlo, both with stores nearby—waiting alone. Known as the Post-80s (80后)—because they were born between 1980 and 1989—this group has never known a China not developing at breakneck speeds, and now they wait, listening to Little Drummer Boy, for a barista to froth them up a sugary chocolate mocha for which they will pay about $5. To put that purchase in perspective, because these workers make about $1,000 to $1,500 a month, that would be like a New Yorker spending $20 (or more) for the same drink… and waiting in line for 15 minutes for the privilege. Starbucks has become China's favorite affordable luxury.

"The way you know when you've arrived as a town or city is when Starbucks arrives," is how a analyst recently described China's Starbucks Economy to Ad Age. In that same analysis of Starbucks' push to "make China love Joe," it's revealed that the brand recently abandoned trying to update the wooden sign in its headquarters lobby that tallied the number and locations of Starbucks around China.

Now, the brand is looking to take a segment that has already bought into the Starbucks lifestyle, and sell them a branded version of a holiday they only understand from a consumption perspective.

As we noted last year about the rise of Christmas in China, "brands like Starbucks are unfettered by the troublesome religious reflection part" faced in the US. In China, Christians do not complain of Santa Claus as a usurper. In China, Christmas has belonged to Santa from the beginning. Even linguistically this is true; the Chinese word for Christmas (圣诞节 shèngdànjié) does not share any of the same characters as that for Jesus Christ (耶稣基督 sēsūJīdū), while Santa Claus is known as 圣诞老人 (shèngdànlǎorén), or literally "Old Man Christmas."

It's noteworthy that this commercialization of holidays is not targeted at Christmas alone. "Singles declare love ... for online shopping," read the headline of the Shanghai Daily one day after the Singles Day holiday, a day "started by college students in the 1990s as an alternative to Valentine's Day." The report noted that the 19.1 billion yuan ($3 billion) taken in by online shopping site Tmall.com was "more than three times the amount raised on the same day last year and more than double the amount Shanghai retailers took during last month's week-long National Day holiday."

Two potential threats against Starbucks' success in China exist. The first are recent stories about how the brand's coffee products are actually more expensive in China. One breathless recent report by Ifeng.com noted not just that Starbucks was a "commoners' beverage" ("平民'饮料'品") but also that it a plain cup of coffee there was 10 yuan, or 83 percent, less expensive. That report was Weibo forwarded hundreds of times. Forwarded over a thousand times was a QQ report titled "Starbucks coffee in China is 75% more expensive than in the U.S." The report attributed this to the fact the Chinese "aren't short on money" ("因中国人'不差钱'").

The second problem Starbucks faces is logistics brought on by its own popularity. Marketers have always known that waiting for product can adds a bit of exclusivity. But there are limits. Anyone who has been to a Starbucks at rush time knows the agony of a massive multi-cup take-out order that causes exponentially longer waits. Anecdotal evidence exists that this is becoming more common. During the noon hour one day, one customer posted a complaint about waiting 40 minutes after an order for ten cups was placed. User "荚荚Pinky" shared a nightmare photo series (below) about the wait after an order for 28 cups.

Then there was user "emmaaaaa," whose post should surely cause Starbucks China a little indigestion after she complained of waiting behind 20 people for an hour and concluded "still not as good as McDonald's coffee!"

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