Starbucks opened its largest outlet last week in Shanghai, and is moving from US to China as its largest operation. Marketing guru Tom Doctoroff looks at the strategy of the US coffee retailer who entered a tea-drinking nation, and gained tracking few foreign companies got, he explains in IdealsShanghai. “A Houdini act of Marketing”.
I once heard an analogy that Starbucks is a true modern day colonial power – one that quietly enters a country, builds four walls around people and puts expensive lattes in their hands. Of course, the actual concept behind the Starbucks brand in the West lies in Howard Schultz’s ‘The Third Space’; being the space between home and work where consumers can slip into a plush chair and quietly read a book in total anonymity and relaxation.
China, however, is a different beast entirely. For one, it’s a nation of tea drinkers, and secondly, consumer behaviour here is very specific. Yet this week brought with it the launch of Starbucks’ new roastery concept in Shanghai, another ribbon to add to a year that has seen Starbucks become the fastest growing brand in China, with 3000 physical stores, a new one opening every 15 hours, and plans to open 5000 by 2021.
Starbucks has entered the China market with extreme precision. ‘The Third Space’ has no relevance in this market and they recognised this instantly. For a premium price and a premium brand, Chinese consumers don’t desire relaxed anonymity, they want to project an identity and status associated with their choice. It was critical that Starbucks localized their strategy, and they did. This is something I like to call ‘Houdini’s Act of Marketing’; Starbucks needed to work out how to maximise public consumption – only then could it charge premium prices.
To a foreign brand looking to make a splash in China, scale is everything. When it launched, the real estate strategy was always to secure big stores in high end office buildings. Individual chairs were also demoted in favour of bigger tables to create social spaces. Starbucks was aligning itself with the ‘professional elite’ and the stores rapidly became a gathering site for people who wished to identify with, and more importantly, project this image.
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