Starbucks Corp. will require customers to make a purchase to sit in its China cafes, part of a push to revive its fortunes in the competitive mainland market. The new seating policy takes effect nationwide from Oct. 22, with stores displaying notices informing customers of the change. Starbucks China stated the move aims to improve the in-store experience and maintain a welcoming third-place environment for customers.
The changes come as Starbucks tries to make its cafes more appealing while battling intensifying competition in China. The chain agreed last November to sell a majority stake in its China business to private equity firm Boyu Capital at a $4 billion enterprise value, bringing in a local partner to help chart its next phase of growth. Starbucks China posted comparable-store sales declines in each of the past two fiscal years, weighed down by fierce competition and price wars.
Sales showed signs of recovery earlier this fiscal year, though the business has yet to demonstrate a sustained return to growth as it transitions to its new ownership structure. Starbucks stopped separately disclosing China’s performance from the third quarter ended in June. The seating change echoes last year's move by Starbucks in the US, where the company reversed a policy allowing anyone to use its cafes without purchasing. Starbucks said the change was intended to prioritize paying customers and introduced a new code of conduct as part of Chief Executive Officer Brian Niccol's effort to make its stores more appealing.
Starbucks has about 8,000 stores in China after first opening in Beijing in 1999. But its position has come under pressure in recent years as cheaper local rivals including Luckin Coffee Inc. have expanded rapidly and consumers have become more reluctant to pay a premium for foreign brands. Luckin dethroned Starbucks as China's biggest coffee chain three years ago.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing