The Appeal of Starbucks to the Chinese Demographic

Introduction

 

Starbucks was first opened in the United States during the mid-1970’s, and has been rapidly expanding its influence across the globe ever since. Relative to its domestic expansion during the 20th century, Starbucks has only recently started to develop its overseas markets, starting in the mid-1990s. With the introduction of the Chinese Gaige Kaifang policy(改革开放 ) by Deng Xiaoping in 1979, the doors to the Chinese economy were opened to the world, thus allowing Starbucks the chance to slowly establish its presence there. The first Starbucks in China was built in 1999, and since then the company has undergone unprecedented growth. In only 14 years Starbucks has managed to build over 800 stores across the Chinese mainland, while projecting there to be over 1500 stores by the end of 2015. Through looking at the numbers alone it’s evident that Starbucks’ holds some sort of appeal to the local demographic of China.  This leads to the question of how and why an American coffee culture industry became so successful in a predominantly tea drinking society.

The goal of this paper is to determine the factors which make Starbucks so appealing to the local Chinese demographic, which in turn led to its massive growth over the past decade.  From a general point of view – based on the accomplishments of other overseas corporations like KFC and McDonalds, my hypothesis prior to conducting field research was that the attraction of an American/different environment as a social space for leisure played a major role in Starbucks’ recent popularity.

The significance of this topic must not be undervalued for it aids in understanding several elements of the contemporary world. First, it provides some insight to the trends of American multinational corporations and their expansions overseas. Second, it represents a crucial aspect of US-Sino economic relations and its steady development.

Setting of Field Research:

 

When conducting field research, my sites consisted of two particular locations; a Starbucks located in ZhongGuanCun (中关村), and one located in WuDaoKou (五道口). To fully understand the context of the data, an accurate description of the environment in both locations is necessary. Zhongguancun is predominantly a large business and shopping area. It’s noted for its massive malls for electronic goods, and housing several prominent official company buildings (such as Microsoft). Aside from this, Zhongguancun is still a residential district therefore small shops, stores and other markets exist, however they are typically not the main focus of the area. Zhongguancun is easily accessible, having several metro and bus stations scattered all throughout the district.

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Zhongguancun Area – Electronics mall

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Map of Starbucks in Zhongguancun

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Area immediately outside Starbucks (looking out of store point of view)

 

On the other side of the spectrum, Wudaokou is a foreigner oriented district. It is renowned for housing several of China’s leading universities – for example Beijing University, Tsinghua University, Beijing Language and Culture University etc. In order to accommodate the sheer number of foreigners and students located here, the area has a large amount of sit-down restaurants, small cafes, and fast food joints.  Thus, it’s safe to say that Wudaokou is a very international, yet studious environment. This Starbucks, similar to Zhongguancun’s is easily accessible – there’s a bus station about a 1 minute walk down the road, and it’s near the hub center of the district.

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Wudaokou street corner (lots of fast food and restaurants)

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Map of Starbucks in Wudaokou

Inside the stores:

 

When looking at the stores from the outside, it appears almost synonymous to a Starbucks located in the United States.  The inside also resembles that of an American Starbucks; however the lounging space in Chinese Starbucks is strikingly larger. The Starbucks in Wudaokou had an estimated 14 lounging chairs, 2 large tables, several along-the-wall tables, and an outside table section with 4 available tables.

The Starbucks in Zhongguancun was undeniably smaller and had much less lounging space – having only 10-12 lounging chairs and 2 or 3 smaller tables. The outside section was also slightly smaller than that of the Starbucks in Wudaokou.

The interior of both Starbucks locations had several advertisements (in Chinese) and posters (in English).There was also a large amount of American merchandise (in English as well), which appeared to be imported from the United States. The uniforms worn by employees are identical to those in the United States – notably the nametags they wear in the states were present here in China as well.

 

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Outside the Starbucks in Zhongguancun

 

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Inside the Starbucks in Zhongguancun

 

 

 

 

 

 

 

 

 

Presentation of evidence/Research methods:

 

Observations:

The primary methods of collecting data during this project were observation, interviews, and independent research. Through each one of these, I was able to obtain information pertaining to several different aspects of the Starbucks environment.

The first trips to my field site, both in Wudakou and Zhongguancun, were to gain a feel for the area and observe as much Starbucks “culture” as possible.  Typically my observations included a wide variety of aspects, ranging from common ritual practices of buying coffee to the type of people who fluctuated in and out of the store. The environment itself in the Zhongguancun Starbucks seemed to be much more upbeat than the Starbucks in Wudaokou. To provide a clearer picture of the atmosphere within the Starbucks at Zhongguancun, this excerpt is quoted directly from my field journal:

“This Starbucks was much more lively – full of sound, gestures, chatting, and laughs. At the 10 tables occupied, 4/10 were engaged in conversation, 4/10 were using technology (laptop or phone), and 2/10 were intently reading books. Since the store was rather busy, the employees were working at top speed, taking orders, leaning over the counter talking to customers and making drinks. They even had 2 or 3 employees taking orders at one time, it was very effective.” – First field site visit (Zhongguancun)

The employees seemed to emanate a serious mentality about their job, making sure to perform to the best of their ability. Going into more detail, the body language of the customers within the Starbucks was very specific,

“The Chinese seemed to have either their cell phones or drink in hand. I saw several individuals stretch and then lounge back into their chairs, staring at what was seemingly nothing. Once again, all of these individuals were clearly taking advantage of the luxurious couches that are so prevalent within Chinese Starbucks.” Second field site visit (Zhongguancun)

This portrayal gives off a very relaxed and casual sense, which emphasizes the idea that this Starbucks is primarily a leisure spot.

These trends are all but invisible when going to the Starbucks located in Wudaokou. While collecting fieldwork there, I noted every time that the overwhelming majority of individuals (20+) tend to quietly sit on their laptops or phones,

“Upon entering the first thing I noticed was that it was quiet, extremely quiet. This was partly due to every single person using a laptop or phone while sitting down. Everyone appeared to be working, relaxing, or socializing all via technology. Audible chatting was scarce.” First field site visit ( Wudaokou)

One reason why I think the Starbucks in Wudaokou contains so many people who work rather than take part in leisure activities inside, is because of the scholarly environment it’s located in. Starbucks can be an ideal place to work but in a more relaxed and comfortable manner. Juxtaposing the environment of this Starbucks with the Starbucks located in Zhongguancun, there’s an obvious difference in the atmospheres. Zhongguancun is a shopping area, therefore promoting a different kind of environment – specifically a louder and livelier one.

Interviews:

The interviews I conducted consist of a large bulk of the evidence as to why Starbucks’ popularity has grown rapidly in China. In particular, one interview stood out among the rest; an interview at the Starbucks in Wudaokou with a Chinese student attending Tsinghua University. Her emphasis was placed upon Starbucks being “A place where I can come and do my work – the library is too quiet, and the environment is nice here”. She also stated that “The drinks are not bad, much better than the cafeteria”. I had several preexisting notions that the Wudaokou Starbucks was a place of leisure and relaxation, however immediately after the interview, I realized the error in my assumption. Evidently, the attraction of Starbucks cannot simply be so one-sided, credited to only leisure. Instead, it appears that the environment itself is the important factor – allowing the customers to use it however they want.

Furthermore, one of my interviewees at the Starbucks in Zhonguancun emphasized the attraction of the atmosphere: “很伟大,也很放松” it’s grand and relaxing – which fits with what she was doing (pleasure reading and relaxing for fun). This perfectly coincides with the observations made in the previous section – and highlights the idea that Starbucks is predominantly used for the space it provides to its customers.

Online Independent Research:

In addition to interviews, I’ve found several other interesting facts about Starbucks through conducting independent research online.  A contributing factor towards Starbucks’ growing popularity seems to be the willingness of the company to adapt to the local demographic.  The CEO of Starbucks explained this tactic and its impact on the Chinese markets – rather than force an environment and set products upon the Chinese people, the company allows for a certain amount of flexibility, allowing it to cater to local taste. The following video is a clip revealing the CEO’s thoughts:  http://v.youku.com/v_show/id_XNTg3NDA1Njc2.html.

Furthermore, I came across several articles  which specifically highlight this unique tactic.  To boost local appeal, a wide variety of Chinese teas and snacks are sold within Starbucks – for example green tea flavored beverages. This coincides directly with the information gathered from my observations; the picture below represents the phenomenon mentioned above. It’s an advertisement for a unique “Red bean green tea” (红豆抹茶/Hóngdòu mǒchá) flavored Frappuccino – unique to China, which I found in the Starbucks in Zhongguancun.

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红豆抹茶/Hóngdòu mǒchá – Red bean green tea

 

This advertisement for “Red bean green tea” – One of the only ads in the Starbucks located at the Starbucks in Zhongguancun – clearly represents Starbucks’ strong desire to adapt and appeal the local demographic. Shaun Rein, the Managing Director of the CNBC China Market Research Group, expands on a similar idea, “Instead of trying to force onto the market the same products that worked in the U.S. like regular coffee, Starbucks developed flavors, such as green tea flavored coffee drinks, that appeal to local tastes”. Because the Starbucks corporation is willing and able to adapt its menu, and environment in a manner which satisfies the majority of consumers, Chinese people can access a wide assortment of Chinese and American products. That is to say, there is always a Western influence simply because of the predominance of American posters, items, and coffee culture within the store, but yet this interesting setup where local tastes are incorporated into Starbucks allows for a multicultural mix between the two. This unique environment seems to encapsulate several themes, and explains why the Chinese people have such an attraction to the store – Western coffee culture, local Chinese drinks, Western atmosphere, Wi-Fi and an environment which they can use to their liking.

Analysis of evidence

 

In the book The Consumer Revolution in Urban China, the chapter “Of Hamburger and Social Space” written by Yunxiang Yan talks about the emergence of fast food restaurants within China, and their impact on the Chinese food industry. Specifically, he focuses on the use of these fast food restaurants as unique social spaces for entertainment and leisure. He emphasizes that Beijing customers simply tend to “appropriate” the space within the restaurant, and have it serve their own purposes for what are typically extended durations of time spanning from 20 minutes to over an hour. This strongly reinforces the data which I have collected over the past month. Pertaining to technology – Starbucks offers free Wi-Fi, therefore catering to anyone with a smartphone or laptop. This correlates directly with my initial observations during my first trip to the Starbucks located in Wudaokou – every single customer sat quietly on their computers and cell phones. Furthermore, after much observation I’ve noticed a major difference between American Starbucks customers and Chinese Starbucks customers; when a Chinese Starbucks customer walks into the store, they don’t typically walk out. Instead, they sit down and use the space to their own discretion. Shaun Rein argues that,

“By offering comfortable environments in a market where few restaurants had air conditioning in the late 1990s, Starbucks become a defacto meeting place for executives as well as gatherings of friends. In other words, Starbucks adapted its business model specifically for the Chinese, rather than obstinately trying to transplant everything that worked in America into China.”

Thus this emphasizes the idea that a welcoming atmosphere with several amenities appeals greatly to a specific class of the Chinese demographic.

Another interesting argument Yan proposes in the chapter “Of Hamburgers and Social Space”, was the fact that there is such limited competition towards dominating fast food chains from Chinese and other American corporations.  Starbucks and Nestle are some of the only large scale producers and distributors of coffee on the Chinese mainland. There is a definite monopoly over the coffee market within China, and from there they manage to expand their influence – catering to the customers’ needs. The difference between Starbucks and Nestle, however, is that while Starbucks is dependent on building stores all over the country to promote “dine in” service – Nestle relies solely upon selling their goods within Chinese supermarkets – thus lacking a personal connection with its customers. Through observation and my personal experience, I’ve recorded that the bond between employee and customer is extremely important. The employees are very kind to their customers, and serve to create a jovial atmosphere where the consumer can enjoy themselves. Regardless of how brief the interaction may be, the kindness expressed by employees certainly plays a role in how the customers view Starbucks – as it would in any other type of store.  Yet again, Shaun Rein’s research reinforces the idea of an appealing Starbucks – focusing on the customer service aspect now, “Starbucks’ service is on par if not higher than many 5-star hotels. In consumer interviews with several hundred consumers in Shanghai, the majority told my firm they actually preferred the taste of products from competitors but continued to go to Starbucks because of the service”.

When lining out the evidence for Starbucks’ growing appeal, it’s evident that there are many factors which main contributors. First, the environment Starbucks provides – allowing the customer to seize a certain space for an extended duration of time. Second, the ability to adapt food and drinks so that the local Chinese feel drawn to the store caters to the local population. Third, the modern environment plus the provision of facilities such as nice couches, tables, and Wi-Fi contribute to the overall welcoming atmosphere. Lastly, customer service plays a large role in developing bonds with the customers. It would be incorrect to say that these factors are mutually exclusive. After accumulating a significant amount of data, it’s evident that each and everyone one of these causes for Starbucks’ appeal rely on one another. For example, without the provision of facilities such as Wi-Fi, there would be no incentive for the customer to appropriate the space provided within the store. Without drinks that cater to local tastes, customers are less inclined to buy drinks that they don’t like or are not familiar with – thus the space and facilities are also wasted. However, among these reasons, there still lies the most influential factor in Starbucks’ appeal to the Chinese.

 

Themes/Patterns:

 

This project has shed much light upon the trends of American multinational corporations (specifically the food industry) and their expansions overseas.  Strategies for success such as adapting to the local tastes of a country and providing specific facilities all play a role in the growth of these corporations. As of today Burger King only has 63 stores within China, compared to the nearing 900 of Starbucks. Its failure to match competitors in the Chinese market has been blamed on its lack of innovation when adapting. Helen Wang, an Award-winning author and expert on China’s middle class analyzes the steps needed to promote Burger King’s growth,

“Burger King could re-invent its Chinese menu with smaller burgers, such as a tapas-sized burger, and with more dish varieties to include crab, fish, or even tofu burgers. It could also add beef tendon dishes and ox tail soups. With some sensitivity, Burger King could also introduce cheese burgers as a western dining experience.”

When contrasted with Starbucks, it’s evident that Starbucks has already taken these steps, and have assured its position within the Chinese market. In effect, the Chinese have welcomed it with open arms, and allowed for its rapid growth. Consequently, this reveals a pattern on the necessity of catering to local tastes – which can be applied on a much larger scale.

It reveals a major aspect of US-Sino economic relations and its steady development. With monopolizing American brands such as KFC, McDonalds, and Starbucks becoming more and more popular with the Chinese people – a different image of the United States is projected. In particular, by providing stores with nice environments, it promotes a certain reputation and cleanliness standards by which American stores abide by. Furthermore, these developments represent the growing capitalistic economy that China is becoming.

 

Bibliography:

 

http://www.cnbc.com/id/46186635

Rein, Shaun. “Rein: Why Starbucks Succeeds in China.” CNBC.com. CNBC, 30 Jan. 2012. Web. 29 July 2013.

 

http://contextchina.com/2013/05/starbucks-nestle-square-off-in-bid-for-dominance-of-chinas-coffee-market/

O’Brien, Robert. “Starbucks, Nestlé Square Off in Bid for Dominance of China’s Coffee Market.” ContextChina. ContextChina Media Group, Inc, 08 May 2013. Web. 28 July 2013.

 

Yan, Yunxiang. Ed. Deborah Davis. The Consumer Revolution in Urban China. Berkeley: University of California, 2000. N. pag. Print.

 

http://wtvr.com/2013/07/28/starbucks-expands-business-throughout-china/

Woo, Megan. “Starbucks Expands Business Throughout China.” WTVRcom. CBS, 28 July 2013. Web. 30 July 2013.

 

Wang, Helen H. “How Burger King Can Recover in China.” Forbes. Forbes Magazine, 04 Mar. 2013. Web. 30 July 2013.

http://www.forbes.com/sites/helenwang/2013/03/04/how-burger-king-can-recover-in-china/