By now the positive trends for Starbucks in China are clear: the company plans to more than double its number of stores by 2015, riding the wave of a middle class in China hungry for the product and community the Seattle company provides. But in order to be successful, Starbucks will have to navigate several newly emerging challenges. One is the need to penetrate less developed cities known as Tier 2 and 3 cities, areas where the economic conditions are right, but where potential customers are not as familiar with its products and cafes. Equally important will be how Starbucks embraces social media, not only to create brand awareness, but also to deal with the inevitable problems that occur for every multinational in the midst of aggressive expansion in a foreign country. Starbucks’ strategy to work through these challenges in pursuit of its growth objectives for China is the second portion of contextChina’s interview with Marie Han Silloway, chief of marketing for Starbucks China.
Q: How will the challenges of marketing and establishing points of sale within China change as Starbucks expands into Tier 2 and 3 cities?
A: The thing about China is it is always changing. We are on track to be the second largest market by 2014 and to have 1,500 stores by 2015. In China one of the areas where you have be very careful about is in [making projections] and it’s because our growth trajectory is so steep. For us, we have to be very thoughtful where we open stores. Starbucks is a lifestyle brand in China and we need to open stores where it makes sense.
Whether it is a Tier 2 or Tier 3 city, every day, we seeing more consumers embracing the specialty coffee house culture as a part of their everyday lives, either in the morning, while they are on their way to work, after lunch with their colleagues, or in the evening, when hanging out and connecting with their friends or family, over a cup of coffee, at their favorite Starbucks store.
We just opened in Nanning, a city in the south, and I had the pleasure of representing Starbucks at the grand opening. The local government officials turned out in force, we had a number of loyalty card members join us – we had a fantastic event! Customers had been queuing up since the store had its soft opening.
To expand so quickly, you have to be thoughtful in hiring and also in training to ensure that every store you go to you receive the authentic Starbucks coffee house experience. Our challenge as we continue on our ambitious growth plans in the market is to remain true to our brand and values. As such, it is critical that Starbucks continues to invest in our partners’ personal and career development and to set them up for future successes.
Our partners are at the heart and soul of our signature Starbucks experience, and have contributed greatly to Starbucks success. Our strong team of 12,000 strong Starbucks partners, across China, has been extremely passionate and committed to helping us achieve our ambitious goals in the market. As we announced a week ago, the Starbucks China University will elevate the existing learning and development infrastructure and will introduce new training modules to meet the evolving needs of our retail and support center partners.
Q: How does Starbucks leverage social media in China? What role does social media play in situations like the alleged “cultural invasion” from several months ago at the temple in Hangzhou?
A: Over the past 14 years since our entry to China, Starbucks has maintained deep respect for China’s cultural and historical heritage and we will continue to do so. This store is actually located in the commercial district, where tourists usually go after they have toured the temple and where they can buy gifts as well as have a meal. The role of social media is critical and you have to be vigilant. What makes us most proud of is our presence being built on the digital space, delivering the unique 4th place Starbucks experience. We have been embracing various innovative digital technologies, social networks, and digital media as part of an ongoing 360-degree conversation with our customers all around the world.
We aim to use digital as a way to have a two-way conversation with our customers. We also aim to make our programs fun and engaging. Starbucks has garnered more than 582,000 active followers on Sina Weibo (as of Dec. 4, 2012), making us the leading China F&B category brand, in terms of the number of followers. In addition, Starbucks expanded our outreach efforts onto two additional social media platforms, Kaixin001.com and renren.com, giving Starbucks a total of more than 386,000 fans on our-company-owned social media platforms in China.
We’re also very proud to be one of the first few brands that entered the WeChat/Weixin space, and have garnered more than 422,000 friends on this platform so far. Weixin’s distinct features, which enable real-time chat, fit in perfectly with Starbucks desire to build genuine moments of connection with our customers both in and outside the store. Our first China mobile application has been widely adopted by over 900,000 users since its launch in February 2011. Most recently, we’ve introduced the “morning alarm” feature, which is designed to encourage customers to rise early and start one’s day with a unique Starbucks experience. The numbers are still growing every day and we are constantly looking at new ways in which we can better engage and connect with our customers. The social media channels played an important role in communicating with our Weibo fans on appropriate and accurate messages in a timely manner.
Q: What are the key issues for Starbucks to be successful over the next ten years as the market in China continues to grow and change?
A: We have to continue to innovate and evolve. The consumer in China has is sophisticated and they are traveling more than ever before. The brand has to deliver an authentic Starbucks experience on a global scale and we have to constantly innovate as a brand to ensure we are delivering very high standards in terms of product and experience. The second is really all about our people. We need to continue investing in our people in a very consistent way. We currently have 12,000 partners, but with our growth trajectory, we will reach 30,000 partners very quickly. Our partners are the beating heart of the organization. Our store partners deliver the store experience. More initiatives like Starbucks China University are really critical.