International

Starbucks And Alibaba Pair Up

In a first for the Seattle-based chain, Starbucks has officially launched an online store in China on Alibaba’s Tmall as part of what the company referred to as an effort to expand its digital reach and consumer base in one of the world’s fastest-growing markets.

Starbuck’s Tmall site features gift cards, coffee vouchers and “unique and specially designed e-cards.”

“With the rapid development of eCommerce, more and more global renowned brands are partnering with Tmall to bring to their customers a seamless premium experience, anywhere, anytime,” Jie Jing, vice president of Alibaba Group, said in a statement.

The new expansion onto Tmall builds off of Starbucks’ existing rewards program and mobile app — also home to such popular features as Mobile Order & Pay. The hope is to capture and retain coffee enthusiasts in China that tend to pay for anything and everything with their phones, i.e., Alibaba’s core demographic.

Chinese growth has been considerable for Starbucks in the last year. FY2015 saw Starbucks’ comparable store sales growth up 9 percent. And that, according to the world’s most successful coffee purveyor, is just the beginning, with bigger growth expected in 2016.

A pair-up with Alibaba, Starbucks hopes, will give it a boost with the new and emerging Chinese middle class. It is far from the only U.S. retailer pursuing such a Tmall-centric strategy. Costco and Amazon both have outlets on the site; eBay uses Alibaba rival, JD.com.

However, Chinese growth in 2015 may not necessarily be indicative of continued expansion in 2016, as China has been in the midst of an economic slowdown, which, in turn, has seen U.S. corporate ambitions slightly stymied by a middle class that is not growing quite so fast.

Still, for Starbucks, which already has a strong physical presence in China’s top-tier cities, the move is strong, as there are still large potions of China in which it has no foothold. But no foothold today doesn’t mean no foothold ever, and many analysts have hailed the eCommerce play as smart in order to introduce Starbucks to the everyday Chinese consumer and potentially build enthusiasm for the product line in advance of future physical expansion.

There is also a lingering question as to whether or not Starbucks’ collaboration with Alibaba on Tmall could lead to future mobile collaboration, particularly in regards to integrating Alipay into Starbucks’ mPay platform. Most anaylsts who reviewed the possibility agreed that the move could have potential for Starbucks, given Alipay’s runaway popularity in China, but that there is risk there, given how protective Starbucks is of its customer base.

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