Starbucks in Shanghai, China: Modern Shanghainese Favorite Third Place (Page 2/2)
November 2, 2015
As an economic activity slows, theoretically consumers tend to spend less. That is true that Chinese consumers are tightening their wallets. However, wealthier Shanghainese are always willing to spend on modern and fashionable goods, like Starbucks drinks and iPhones, whether its economic activity continues to slow or not. It is very common to see most passengers on Shanghai Metro lines hold a newest gold-, now rose gold-colored iPhone 6S or 6S Plus in hands while you may have to wait longer to grab your favorite Frappuccino at one of Starbucks stores in downtown.
Shanghainese love chatting about and showing off any modern products or experiences they have recently had. With their higher-than-nationwide income level, they can easily travel overseas, especially neighboring developed economy, Japan, after they have already traveled to cheaper-to-travel countries, like South Korea, Hong Kong, Thailand, and so on. Immigrant white-collar workers, on the other hand, have to work hard to earn higher income and submit taxes so that they can finally apply a visa to travel to Japan.
(L) Gold iPhone 6 and 6 Plus are very popular and are often seen on Shanghai Metro Line 2 train cars. (C) Young ladies are heading to Line 2 Metro station after purchasing new rose gold iPhone 6S Plus at East Nanjing Street Apple Store. (R) A modern Shanghainese enjoys her new rose gold iPhone 6S Plus on a Line 2 train car.
Like in the United States, Starbucks China offers its loyal customers Starbucks Rewards Program. Earning Stars in Chinese program is different from the one in the United States. To earn a Star, Rewards Program members in China need to spend 50 yuan of Starbucks products in store. By accumulating five Stars or spending 250 yuan within a year, a general Welcome member promotes to a Green level, and by collecting 25 Stars or 1,250 yuan spent, she can reach a Gold level. Upon attaining the Gold level, she can receive a personalized Gold card as well as one free drink for evey 10 purchses and so on.
Spending 1,250 yuan, equivalent to about US$200, for Starbucks products annually is not a difficult hurdle for wealthy Shanghainese. Rather they would like to spend that amount to receive a Gold card to obtain a status while showing off its shiny gold card to people behind the line in a store. One of the interesting behaviors that Shanghainese like to show in a Starbucks store is that they always like to purchase the largest Venti-sized beverage. The size matters and it is the Shanghainese way. A popular Venti-sized Green Tea Frappuccino costs whooping 36 yuan, more than one-eighth of Shanghainese average daily income. <Also read - The Power of Loyalty: Analyzing My Starbucks Rewards Program in China and Thailand>
Inside the Starbucks stores in Shanghai is generally crowded and noisy, though it is depending on time and location. As mentioned earlier, Shanghainese love chatting and tend to talk loudly with its own dialect. If you know some Mandarin, you may not understand what they are speaking of. Not only the Shanghainese, local middle-class residents also like to spend a time in a store. Starbucks stores have turned into a great third place for them to rest, study, and chat while enjoying their favorite beverages. In the meantime, they believe that Starbucks is very fashionable and modern, nicely matching what they are seeking for in their lives.
(L) Starbucks store at Times Square in Shanghai. It is quite common that customers need to form a long line to grab a coffee. (R) Starbucks store at Wujiaochang in Shanghai. This store is not located in downtown area but it is popular among local residents. They enjoy chatting throughout the night until the store closes at 11pm.
In such dynamic commercial city, Starbucks welcomes its competitors. There are numerous coffee shop operators across the city. Pacific Coffee, The Coffee Bean & Tea Leaf, and many individually owned cafes are spread across the town or sometimes they are located right next to a Starbucks store. Plus, reasonable local drink shops are always settled across the corner in greater Shanghai. Its leading shop is probably takeout-only COCO, a typical milk tea vender that you might also see in your home country, especially in Chinese committees. COCO dinks are very reasonable. For instance, one of the popular COCO Bubble Milk Tea costs only 8 yuan.
(L) An each COCO store is tiny but it offers a variety of hot and iced drinks. Thanks to its store size, COCO is nicely spread across the city and its popularity is enormous. (C) COCO has just started off its COCO café, which serves coffees, such as Americano and Macchiato, at reasonable prices than Starbucks’. (R) Some COCO stores have added some tables for in-store customers.
Interestingly, this COCO has just added COCO Café in its lineup in some stores and it is expected to see more COCO Cafes across China in coming months and forward. COCO Café uses Thermoplan coffee machines, nicely spreading fleshy coffee aroma around the neighbor. Its Americano and Macchiato cost only 8 yuan and 15 yuan, compared to Starbucks’ 22 yuan and 31 yuan, respectively (though no caramel in COCO’s Macchiato). Plus, some COCO stores added a counter table in the store to allow customers to rest while enjoying its coffee. Since COCO has already been very popular among the Chinese, returning customers are huge thanks to an availability of a variety of both iced and hot milk tea lineups, now plus coffees.
On the other hand, Starbucks drinks are relatively premium for Chinese consumers. For instance, Caramel Macchiato (Tall, hot) across mainland China costs 31 RMB or US$4.88 in today’s exchange rate. With that 31 RMB, they can purchase several dishes of food, such as a bowl of soup noodle, fried rice, and fried dumplings. Or if you step into McDonald’s, you can purchase two sets of a Filet-O-Fish meal.
It is highly interesting to see Chinese consumers at Starbucks stores in Shanghai or across mainland China because those who can step into the stores to enjoy its drink tend to be classified as wealthier middle-class people, who earn generally higher than nationwide average income. Nowadays, Starbucks stores are located everywhere across China, such as inland cities like Changsha, Chongqing, and Chengdu to name a few. Per capita income of those inland cities is not impressive as Shanghai’s. However, there are still reasonable amount of the middle class customers in those inland cities, who also like to seek modern experiences offered by Starbucks. It is no reason Starbucks is quickly expanding throughout China to welcome fast growing middle-income consumers and especially in Shanghai.