Why Starbucks’ Partnership with Alibaba is Roasting Up the Competition in China’s Coffee Market

Starbucks and Alibaba’s historic partnership announced earlier this year in August is aiming to expand the coffee companies business operations and brand presence in China, as they further break into the local market historically monopolized by tea. The partnership will allow for the seamless integration of Starbuck’s digital experience offerings with Alibaba’s online ecosystem, and looks to set the precedent for coffee e-commerce on a global scale.

Starbucks CEO Kevin Johnson has boldly stated that“Our transformational partnership with Alibaba will reshape modern retail, and represents a significant milestone in our efforts to exceed the expectations of Chinese consumers.”

But what does this unified collaboration between the two global companies entail? Well, quite a lot.

Firstly, an innovative and centralized online management hub has been developed by Alibaba, with aims of delivering a uniquely personal, yet uniform Starbucks customer experience across a multitude of digital platforms including Alipay, Ele.em and Koubei. A customer simply needs to place an order on the Starbucks app, and an alert is sent to one of over three million drivers registered to Ele.me, China’s leading on-demand food delivery company which Alibaba acquired in April of this year. The entire process occurs in the one simplified transaction within under 30 minutes, which Starbucks` believes will revolutionize the traditional offline-to-online system.

The American coffee company is also expanding its app and website into Alibaba’s multitude of Chinese e-commerce sites, most notably Taobao and Tmall. Their current Tmall flagship store includes a wide range of products, including coffee vouchers, gift cards and specially-designed e-cards, with efforts to integrate their Rewards Membership program already underway. This will allow Starbucks to better penetrate the local Chinese market, offering innovative product differentiation aimed to bring about a truly unique and personalized customer experience.

The prospective partnership not only allows the company to easily track its sales data via a singular access point, but opens the door to over 500 million Alibaba users. Starbucks hopes the move will increase its digital reach and corporate awareness amongst the new and emerging Chinese middle class, who are hungry more then ever for higher-value western products. But with Starbucks main competitor Luckin brewing up huge levels of local demand themselves, only time will tell if Alibaba’s aim to boost their digital on-demand services will align effectively enough with Starbucks mission “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” to take this partnership to unparalleled levels.