Starbucks is pairing up with the e-commerce service Alibaba Group Holding Ltd. to deliver food and beverage products in China, the Wall Street Journal reported. The move comes as Starbucks recorded an earning slowdown in its last quarter.
The deal with Alibaba’s food-delivery service Ele.me will be announced later this week, and the delivery partnership will start in the fall, according to the WSJ’s sources. Though Starbucks didn’t specifically comment on Ele.me, the company previously said it was planning to work with a partner for delivery in China.
“We start this fall in Beijing and Shanghai, with plans to expand across the country as we enter calendar 2019,” said Belinda Wong, the chief executive of Starbucks China.
In its financial results for the third quarter, which ended on July 1, Starbucks reported a 2% decline in comparable store sales in China.
“The problem is Starbucks is no longer viewed as an aspirational brand,” said Shaun Rein, the managing director of China Market Research Group, according to the Wall Street Journal.
Analysts believe this is partially due to new competition, including from the startup coffee company Luckin Coffee in Beijing. In the last seven months, Luckin has opened 660 stores where coffee is brewed and then delivered to customers by scooter.
“Luckin tastes good and is cheaper,” said 32-year-old business analyst, Lin Jinghan, adding that Luckin offers delivery straight to the office, making it a convenient option.
“While recent coffee market entrants have chosen to capitalize on delivery combined with heavily discounted offers, there’s significant compromises at play in terms of quality, experience, and business sustainability,” Wong said in an earnings call with analysts. She added, “Let me assure you that our new delivery service will adhere to the high standards our customers in China have come to expect with regard to the Starbucks experience.”