Dive Brief:

• Starbucks launched its first express retail store in China, called Starbucks Now, that combines the company's Mobile Order & Pay feature as well as Starbucks Delivers, according to a company press release.
• Customers are greeted by a barista at a coffee concierge counter who assists with pickup and ordering on a wide variety of options including customizable drink options. There's also a designated area for easy pickup where drivers can access orders from secure in-wall system with designated pickup portals associated with each order. There will also be a centralized dispatch center for delivery orders within a specific radius.
• The new store is located in Beijing's financial district, and targets the heavy workflow traffic in the area. The company plans to open more of these stores in high-traffic areas, including business and transit hubs, across China.

Dive Insight:

Starbucks is likely targeting China for its new concept to stave off competition from its rapidly growing rival, Luckin. Since it opened in June 2017, Luckin has launched over 2,300 store locations in 28 Chinese cities and has plans to go public at an offering that values the company at $4 billion, according to TIME.

One-upping the competition with more convenience and the promise of a quicker delivery could help persuade some Luckin fans to go with Starbucks. Fancy features like a coffee concierge service also add a new touch that may make some consumers curious to know what Starbucks' new concept is all about.

Starbucks launched its presence in the Chinese market 20 years ago but it's been suffering from slow sales, with only 1% growth in the last quarter of 2018, falling from 8% the year before. Analysts have suggested that economy-wide stagnation is to blame for Starbucks modest sales, but many can't help but think that Luckin's market share is part of the blame, according to TIME.

Some of its other tactics to compete with Luckin include creating drinks that are tailored to Chinese consumers tastes like a smooth iced coffee with vanilla or green tea flavor, and launching the world's largest Starbucks roastery in Shanghai to dazzle tourists and city dwellers, according to NPR.

Luckin has taken a completely different approach, operating almost exclusively as a pickup or delivery format. This could be the most compelling reason that Starbucks created this new concept with a more stripped-down store centered on getting drinks in customers' hands as soon as possible.

Starbucks has been taking a similar tactic in the U.S. but hasn't rolled out an express format like this quite yet. Instead, it's been focusing on expanding digital offerings like mobile payments. It's boosted its loyalty membership by 13% after it switched to a spend-based program, with rewards club members making up over 40% of sales.

It’s not wild to think that Starbucks could bring the express format stateside considering how many other coffee retailers are focusing on convenience-related offerings. Earlier this year, Peet's Coffee expanded its Order Ahead options on its app, which also enables a digital Peet's Card with loyalty program rewards. The Coffee Bean & Tea Leaf, Philz and Caribou Coffee also have mobile ordering apps. Even Burger King launched an app-based coffee subscription service that gives users one daily coffee from participating restaurants in exchange for a $5 monthly fee.