Why Are Fewer People Going to Starbucks in China? Why Is Starbucks Coffee So Expensive?

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Starbucks' Declining Popularity in China

Today, many netizens on Weibo are discussing why fewer people are going to Starbucks in China and why Starbucks' sales are declining in the Chinese market.

According to Starbucks Corporation's first-quarter 2023 financial report released this February, global same-store sales increased by 5% year-on-year, while Chinese same-store sales decreased by 29% year-on-year. Regarding these figures, some Wall Street analysts noted that China, as Starbucks' second-largest market globally, significantly "dragged down" performance in the first quarter.

In response to analysts' evaluations, Starbucks interim CEO Howard Schultz stated that the decline in Chinese market sales was due to pandemic-related mobility restrictions and the surge in COVID-19 infections following the cancellation of the zero-COVID policy. However, the final data exceeded their expectations by as much as four times.

Is COVID-19 the Only Reason for Starbucks' Decline?

Is the decline in Starbucks' China sales truly just due to the pandemic? According to current discussions among netizens, the pandemic seems to be just a "final blow" - the fundamental issues appear to lie in operations and management themselves.

The reasons people give for visiting Starbucks less frequently generally revolve around these points: "Arrogance in crisis public relations has reduced consumer goodwill," "Service experience is increasingly poor," "Products are repetitive with no innovation and don't taste good," "Low product value with growing coffee alternatives," and "Economic downturn has led to reduced consumer spending."

Arrogance in Crisis Public Relations Has Reduced Consumer Goodwill

Last year's incident where Starbucks staff removed police officers dining in the outdoor seating area, and the subsequent handling by Starbucks China, accelerated consumers' loss of goodwill toward the brand. The main reason is that when faced with such incidents, regardless of whether the process unfolded as described in the police statement, if facts confirm the incident occurred, offering sincere apologies immediately and demonstrating a proper attitude would have prevented such high levels of public anger.

However, when handling this matter, Starbucks tended to first use facts and reasoning to prove they "were not wrong," thereby ignoring negative public sentiment. They also failed to address the negative impact promptly, allowing this incident to become a persistent consumer complaint that led to increasingly reduced goodwill toward the brand.

Deteriorating Service Experience

The pandemic increased Starbucks' operating costs, and staff in almost all stores have been "compressed" to their limits, with employees becoming increasingly versatile. In some average-performing stores, shift schedules consist of just one employee plus one manager. When faced with multiple positions handled by a single person, merely ensuring service speed becomes challenging, let alone addressing customer experience.

This creates a vicious cycle: declining customer experience = reduced repeat visits = continued sales deficits = higher operating costs = further cost reduction = continued decline in customer experience...

Lack of Product Innovation

Observing Starbucks' new products across multiple regions reveals that beverage innovation in the Chinese market is somewhat conservative. In other regional markets, new products are launched for every thematic campaign, with rarely any repetition. Even when items are repeated, they're typically positioned as classic product returns, paired with other new flavor innovations.

In contrast, Starbucks China's new products are either completely unchanged or feature new offerings with similar flavors. For today's consumers who seek novelty, this holds little appeal and fails to meet most consumers' flavor expectations.

Low Product Value with Growing Alternatives

A large beverage typically costs thirty to forty yuan or more. Even with relevant coupons, the flavors don't appeal to the masses, and consumers have little motivation for repeat purchases. When compared to classic products or previous themed offerings, consumers gradually position the brand and products as having low value for money.

Meanwhile, the rapid rise of other domestic coffee brands with flavor innovation and affordable prices, coupled with three years of pandemic-induced home office work, led people to purchase various coffee products online for home brewing, thereby reducing attention to Starbucks.

Economic Downturn and Reduced Consumer Spending

In recent years, domestic milk tea brands and coffee chains have rapidly emerged with fast-paced flavor innovation and affordable prices, causing Starbucks' primary white-collar customer base to switch to more budget-friendly options. On social media platforms, people rarely share Starbucks coffee anymore, instead preferring new milk tea flavors. Some netizens mentioned that previously, when drinking coffee at Starbucks, neighboring tables would be occupied by people with laptops, conducting phone conferences and discussing brand strategies, missions, and visions - making them feel their own concerns were trivial and hesitant to chat loudly about gossip nearby. Now, when visiting Starbucks, they hear discussions about how to pay social security in the future, how to ensure retirement security, and whether this generation will still receive pensions.

The Path Forward for Starbucks in China

From netizens' reactions, it's clear that perhaps what Starbucks needs to consider isn't accelerating expansion into lower-tier markets or rapidly opening new stores, but rather focusing on the operations of existing stores. Correspondingly increasing operating costs and staffing might be the key to change.

Although accelerating expansion into lower-tier markets represents Starbucks' approach to lowering its profile and connecting with mass consumers, today's coffee and coffee shop options are abundant. If even their most prided third space and Starbucks service experience cannot be better maintained, it may be difficult to win back consumer trust in the brand.

Image source: Internet

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