How Starbucks Aims to ‘Revolutionize’ Customer Experience

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Starbucks China partnership with Alibaba

Starbucks partnered with Alibaba Group for its flagship store in China that opened last December. The two-story, 30,000-square-foot Shanghai Roastery became the company’s second roastery after Seattle, with small-lot Reserve coffee sourced from around the globe, including China’s Yunnan province, prepared for sale and onsite consumption.

The Shanghai Roastery was the first of Starbucks’ locations worldwide to seamlessly integrate a real-time, in-store and online customer experience, powered by Alibaba’s Taobao app and augmented reality technology. Now they’re expanding that partnership in a way that will transform both their businesses.

By deepening their partnership, Starbucks and Alibaba project that they will turbo-charge the current growth rate of coffee consumption in China, which currently stands at around 20% annually, or more than 2% above the global growth rate for coffee consumption.

Starbucks and Alibaba Group said in a joint statement that they’re extending their partnership to “enable a seamless Starbucks Experience and transform the coffee industry in China.” As part of the new agreement, Starbucks will expand delivery to 2,000 stores in China using Alibaba’s branded channels and network.

The announcement “marks a historic moment as two iconic, global companies build on their distinct retail and technology strengths to revolutionize the customer experience.”

Chinese expansion is critical for Starbucks to continue its sales growth momentum in China, a critical market. “Thanks to the elevated customer experience delivered by our over 45,000 partners, Starbucks is growing and innovating faster in China than anywhere else in the world,” said Starbucks president and CEO Kevin Johnson.

“Our transformational partnership with Alibaba will reshape modern retail, and represents a significant milestone in our efforts to exceed the expectations of Chinese consumers,” he added. “Starbucks China is one to watch, and I have full confidence in the team that will bring the new innovation behind the Starbucks Experience to life.”

‘A New Coffee Culture’

“We’re going to integrate a Starbucks virtual store into all of the Alibaba Group properties,” Johnson told CNBC. “This means that a customer that uses Alipay or Taobao or Tmall or Hema has an integrated Starbucks virtual store similar to the mobile app embedded right into that experience. That opens up 500 million or more active users of those apps that will have access to Starbucks.”

Alibaba Group CEO Daniel Zhang added: “Starbucks is more than a destination for premium coffee and we share the same vision to pioneer a new coffee culture and lifestyle through innovation and technology. Alibaba is thrilled to expand our existing partnership with Starbucks by leveraging our cutting-edge New Retail infrastructure and digital power to enable an unprecedented experience for consumers. This partnership is again a testament to the success of our New Retail strategy.”

“Our Chinese customers have a high expectation of their Starbucks Experience and we are proud to introduce a premium delivery experience that reflects the same service and quality they’ve come to love and expect from us in our stores—we will never compromise,” said Belinda Wong, CEO, Starbucks China.

“More significantly, through our partnership with Alibaba, we are breaking the physical and virtual barriers between the home, office, in-store and digital space, making China the first Starbucks market to deliver a seamless Starbucks Experience across all facets of our customers’ lives and further reflecting the uniqueness and strategic importance of the market.”

‘A Virtual Starbucks Store’

The companies will co-create a first-of-its-kind virtual Starbucks store that will integrate multiple platforms across the Starbucks and Alibaba ecosystems, to enable a seamless and more personalized experience for members to register, redeem benefits and enjoy an extensive range of services.

Collaborating across key businesses, including Alibaba-owned Ele.me (a food delivery platform), Hema supermarkets, Tmall, Taobao and Alipay, Starbucks will test delivery services in September 2018; establish “Starbucks Delivery Kitchens” in Hema stores; and integrate multiple platforms to co-create an unprecedented virtual Starbucks store.

The partnership promises to give an even more personalized online Starbucks Experience for Chinese customers. Starbucks will use Ele.me’s on-demand platform to pilot delivery services in Beijing and Shanghai, with a delivery program to expand across 30 cities (to more than 2,000 stores) by the end of 2018.

A key strategic initiative under the partnership is the development of a pioneering, first-of-its-kind virtual Starbucks store in China. This digital partnership will see Alibaba develop a centralized online management hub, with the unique capabilities to integrate and deliver a consistent Starbucks Experience across multiple digital platforms.

This innovation will transcend the traditional limitations of a single-app visit by providing the consumer an elevated, and even more personalized Starbucks digital experience across the Starbucks app and Alibaba’s customer-facing mobile apps, including Taobao, Alipay, Tmall and Koubei.

Seamless and Ubiquitous

In choosing Alibaba as its local partner, Starbucks China aims to revolutionize the traditional offline-to-online model by extending the reach of the Starbucks Experience into the everyday lifestyle of the Chinese consumer, regardless of time or place.

Whether at home or in the office, within a Starbucks store or online, Starbucks China customers will be able to access and enjoy a one-stop Starbucks Experience when purchasing merchandise online, buying a Starbucks handcrafted beverage to be delivered to a friend or sending a Starbucks gift of love on the “Say it with Starbucks” social gifting platform.

Starbucks will integrate its Starbucks Rewards membership platform onto the centralized system to leverage its consumer insights to deliver a truly personalized experience to its customers, while establishing a strong foundation for the future development of Starbucks digital experiences in China.

Starbucks and Alibaba commented that they are “trusted business partners who share common values in the spirit of innovation and the unrelenting pursuit of product and service excellence.” This deeper, expansive partnership is a significant milestone to elevate the customer experience across China.

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