One of China’s leading coffee chains, Luckin Coffee, has entered the US market with not one, but two new stores in New York City. One is located at 755 Broadway, close to New York University and is aimed at students. The other is at 800 Sixth Avenue, close to the Empire State Building, targeting businesspeople and tourists. Notably, the Sixth Avenue branch is less than 100 metres from the nearest Starbucks location.
At the end of June, Luckin launched a pop-up offering a free drink on registration, ahead of the opening of its new branches. Users could also receive exclusive gifts by posting about Luckin on their social media accounts. This is similar to the online-centric strategy the chain uses in China. However, Luckin did not bring its heavy use of vouchers and price war tactics to the United States. Drinks are priced between 3.45 USD and 7.95 USD, comparable to Starbucks, and in some cases, even more expensive.
With news that Starbucks is looking to sell some of its stakes in China, Luckin landing in the American coffee giant’s backyard quickly drew attention from both media outlets and netizens. From CNN and NBC to Business Insider, everyone seems to be urging Starbucks to watch out. However, Luckin confirmed that both stores are grab-and-go style fast service locations and has no intention of competing in the “third place” (sometimes “third space”) offered by Starbucks.
In fact, commentators from China believe that the largest obstacle Luckin faces is not Starbucks, but the established coffee market in the US, and how to localise its brand amid the high costs of running offline locations. With Chinese competitor Cotti already struggling in South Korea with its low-price strategy, the price war that rages in China is likely to be unsustainable in the US. Will Luckin’s unique menu offerings be enough to lure American coffee lovers? How it differentiates itself from other chains in the market will be key for Luckin.