#Michelle Ma
2017.05.11
Chapter 1. Starbucks, the legend that never ceases to evolve
Introducing the columns written by members of Amorepacific Group
ColumnistMichelle Ma
APC Marketing Division
Greetings! I'm Michelle Ma at APC Marketing Division. This is my first time to challenge the AP Member Column, so I feel a little nervous. Through my column, I'd like to share stories of innovative corporations and time to inspire all of us. From now on, I'd like to speak and study with you around six different themes. If you have any themes deemed interesting or topics you want to research, please feel free to leave me a message!
# Why do people love "Xing Baba" (Starbucks' nickname, "Papa Star") so much?
The 2017 Starbucks New Year's Special Edition Diary
Frankly speaking, the taste of Starbucks coffee was not particularly impressive. In fact, many friends of mine would say, "Starbucks drinks really don't taste that good." But, Starbucks is almost always crowded. After I returned to Shanghai, I passed by Starbucks in the morning and my jaw dropped at seeing so many people queueing there. Inside, office workers working in the neighborhood were gathering to get their coffee fix. Starting from 8:40 a.m., they would gather at the bustling café to enjoy their morning latte. A company owner and his or her colleagues liked to share a coffee there together, and there are indeed quite a lot of Starbucks fans who insist on treating their clients to a Starbucks. In the middle of the urban jungle, the best spot is almost always taken by green Starbucks signage. Come rain or shine, some customers make sure to go to their favorite Starbucks.
Starbucks chairman and CEO Howard Schultz once said that Starbucks was "not a coffee company but a media company." Thinking hard of the reason why he said that, I've concluded that the brand offers "experience of space." And, it's that which differentiates Starbucks, which in fact was one of key factors how Schultz was able to build the commercial coffee empire. In fact, Schultz once said, "Starbucks has become the living legacy of my dad," which was touching to me. His father had lost his access to the American Dream, but his son did manage to achieve to inspire everyone. Even if you don't believe the story, Schultz's vision and perseverance through which he was able to expand the original Starbucks in Seattle to Starbucks worldwide is worthy of admiration and deep respect.
# Success story of Starbucks
Schultz's father, a blue-collar worker, lost his income after breaking his ankle, and more importantly health insurance. He had liked coffee for most of his life, but since the accident, he drank alcohol almost everyday. Once the young Howard stole a can of coffee for his father's Christmas present, he was caught out and his father beat him up so badly that father and son became distant and didn't speak to each other for some 20 years. Howard even lied to his fiancé that his father had passed away. His father in fact died years later from lung cancer. Howard found out that his father had kept the can of coffee that he had once stolen. He then realized his father had a dream of opening of his own coffee shop.
In 1984, Schultz saw a real estate advertisement for a small coffee shop in Seattle by accident. He quit his job where he earned a salary of US$75,000 per year and moved to Seattle with his family. After opening his own Starbucks café, Schultz went on a business trip in Italy and discovered that in Milan alone there were some 1,500 coffee shops. He was impressed by the fact that in Italy coffee shops functioned as a social center. He introduced the idea of Starbucks as a place of socialization to Americans, but was initially rejected, much to his disappointment. Schultz convinced the original founder of Starbucks to change the management style of selling coffee beans for home use only, while emphasizing Starbucks as the "Third Place," . This new idea was met with opposition by most coffee industry operators, including the founder of Starbucks.
In 1984, Schultz saw a real estate advertisement for a small coffee shop in Seattle by accident. He quit his job where he earned a salary of US$75,000 per year and moved to Seattle with his family. After opening his own Starbucks café, Schultz went on a business trip in Italy and discovered that in Milan alone there were some 1,500 coffee shops. He was impressed by the fact that in Italy coffee shops functioned as a social center. He introduced the idea of Starbucks as a place of socialization to Americans, but was initially rejected, much to his disappointment. Schultz convinced the original founder of Starbucks to change the management style of selling coffee beans for home use only, while emphasizing Starbucks as the "Third Place," . This new idea was met with opposition by most coffee industry operators, including the founder of Starbucks.
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The original Starbucks located in Pike Place Market, Seattle.
The exterior (left) and the first logo of Starbucks (right)
Sources : (1) Xing Baba behind Starbucks, https://sanwen8.cn/p/171ys66.html
(2) The original Starbucks, Seattle, https://news.cnblogs.com/n/521389/
The road to innovation was not smooth. To make matters worse, just when Schultz decided to purchase the Starbucks chain, he was met with the decline of coffee sales nationwide. Nevertheless, much to the surprise of those around him, he managed to receive a loan of US$4 million. Still he didn't want to save prime cost and gain profit fast; on the contrary, he prioritized employee welfare by offering mandatory health insurance to not only full-time staff, but also part-time staff and dividing stocks. Many people wondered if his particular way of business operation might have to do with the memories of his father who had long suffered from not receiving any benefits as an employee. This aspect has been regarded as critical for Schultz creating and expanding the world's leading coffee empire. To Schultz, the potential of his employees was most important. He believed that it was Starbucks employees who could ultimately provide customers with a better space to experience coffee. Since he believed in the value of each employee, he didn't hesitate to support Starbucks employees. Years later, Schultz ended up proving to people around the world that such a "small" investment at the beginning would become so meaningful.
Starbucks in the U.S. gradually became the "Third Place" as Schultz had long sought. In May 1992, Starbucks became the first specialty coffee company to be listed on the stock exchange, with over 117,000 employees working in 12,000 – and counting – stores in 37 countries around the world, including North and South America, Europe, the Middle East and Asia. In Starbucks stores throughout the world, we can easily see customers and employees engaged in casual conversation. Starbucks employees customarily spend over 24 hours on professional training, carrying the attitude of passionate professionals. It was no doubt that more and more customers wanted to stay at Starbucks. Now, when people think of having a meeting, they tend to think first of Starbucks. The concept of an "American community coffee shop" as planned and promoted by Howard Schultz has now spread around the world. Starbucks is tremendously successful in China, where I am now.
Starbucks in the U.S. gradually became the "Third Place" as Schultz had long sought. In May 1992, Starbucks became the first specialty coffee company to be listed on the stock exchange, with over 117,000 employees working in 12,000 – and counting – stores in 37 countries around the world, including North and South America, Europe, the Middle East and Asia. In Starbucks stores throughout the world, we can easily see customers and employees engaged in casual conversation. Starbucks employees customarily spend over 24 hours on professional training, carrying the attitude of passionate professionals. It was no doubt that more and more customers wanted to stay at Starbucks. Now, when people think of having a meeting, they tend to think first of Starbucks. The concept of an "American community coffee shop" as planned and promoted by Howard Schultz has now spread around the world. Starbucks is tremendously successful in China, where I am now.
1Third place is a term coined by sociologist Ray Oldenburg and refers to the social surroundings separate from the two usual social environments of home and the office, which foster broader, more creative interaction.
# Starbucks, the legend that does not cease to evolve
There are currently over 2,000 Starbucks cafés in China. Starbucks was first introduced to China in 2000, and from 2011, each year on average 400 new stores are opened. In the country where tea culture was deeply rooted, the great success made by Starbucks has been due in large part to its attempts at novel methods of operation to differentiate it in the Chinese market.
Starbucks not only sells liquor, but also delivers tea drinks. Recently, the brand has conducted an alternative local food project releasing 38 varieties of new menus in 12 provinces. With the goal of opening a total of 5,000 stores in China by 2021, at the beginning of each year, Starbucks conducts a limited-edition diary marketing campaign. If you have ever seen the Starbucks glittering gold diaries, which is the design preferred by Chinese customers, you can surely see the great lengths marketers at Starbucks have gone to in order to better know their consumers. They have even dispatched advertising messages, as shown in the photographs below, via WeChat accounts of Jiangsu, Zhejiang and Shanghai branches.
Starbucks not only sells liquor, but also delivers tea drinks. Recently, the brand has conducted an alternative local food project releasing 38 varieties of new menus in 12 provinces. With the goal of opening a total of 5,000 stores in China by 2021, at the beginning of each year, Starbucks conducts a limited-edition diary marketing campaign. If you have ever seen the Starbucks glittering gold diaries, which is the design preferred by Chinese customers, you can surely see the great lengths marketers at Starbucks have gone to in order to better know their consumers. They have even dispatched advertising messages, as shown in the photographs below, via WeChat accounts of Jiangsu, Zhejiang and Shanghai branches.
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2017 Starbucks Promotion Diary (China)
When it releases new products, Starbucks reacts fast to O2O (Online-to-Offline) marketing and mobile payment system. For example, Starbucks in Korea offers "Siren Order" through the Starbucks mobile app in order to resolve the problem of busy customers standing in long queues. On the way to Starbucks, customers can select a specific store and order drinks through the Starbucks mobile app and then pay in advance. That way, by the time he or she arrives at the café, their drinks can be picked up without having to wait. All steps are done at once, and nothing is complicated. In the field of mobile payment system, Starbucks has pursued its own payment system in many countries.
But, under the unique market circumstances it faces in China, Starbucks didn't see any result from the payment system. So, following Chinese trends, Starbucks applied the WeChat payment system instead. That Starbucks gave up on its own payment system and adopted a new system was a significant step in offering consumers a more convenient experience. Thanks to such adaptability, Starbucks has become one of the most beloved brands in China. We don't think Starbucks' reputation – "Starbucks is uniquely attractive non-tech brand." – is an overstatement.
But, under the unique market circumstances it faces in China, Starbucks didn't see any result from the payment system. So, following Chinese trends, Starbucks applied the WeChat payment system instead. That Starbucks gave up on its own payment system and adopted a new system was a significant step in offering consumers a more convenient experience. Thanks to such adaptability, Starbucks has become one of the most beloved brands in China. We don't think Starbucks' reputation – "Starbucks is uniquely attractive non-tech brand." – is an overstatement.
# In conclusion
When it comes to taste, most people will say they have drunk better-tasting coffee at other coffee shops. But, considering the café's unique space, they will naturally choose Starbucks over other brands. When coffee business operators in the same industry discussed the taste of coffee, Howard Schultz offered unique insight: "Starbucks doesn't simply sell coffee, but people's experience of space." His accomplishment in the industry attained through continuous innovation and challenge is evident in Starbuck's quest for a "better experience offered to customers." His pursuit of the "Third Place" might not even appear perfectly successful to some sociologists. Even if the concept of the "Third Place," emphasized by sociologists as "the social surrounding separate from the two social environments, home and work, where entertainment is provided," has not been materialized in most Chinese Starbucks stores, it nevertheless remains the case that, to Chinese consumers, Starbucks has become closely associated with the image of a high-class business space where office workers can continue to work. At least for customers who need to work there, Howard Schultz has provided a space where "Drinks are not bad, sandwiches are delicious, and Wi-Fi is fast."
Innovation doesn't always guarantee success, but if a corporation fails to reinvent itself and lead the trend, it might as well wait to die. Looking around, most people pursue stability and seek development, personal or collective, only under practical circumstances. That is, only a few people succeed by continuously devoting themselves to a cause and feeling their own accomplishment. Without innovation, none of the major corporate empires that rose to the top would have accomplished such exceptional success. So, we need to share their cases and learn even from their failed challenges by summarizing their performances. Earlier this year, Starbucks stopped selling beer and wine at 439 stores in the U.S. Gradual innovative attempts will lead a corporation closer to success. Innovation is not something we speak in words alone, but something we must practice through our actions. If we can make a small change and revitalize our job and life, then I strongly believe we can go hand in hand with our corporation to achieve our grand and far-reaching goal of becoming a Great Company.
Innovation doesn't always guarantee success, but if a corporation fails to reinvent itself and lead the trend, it might as well wait to die. Looking around, most people pursue stability and seek development, personal or collective, only under practical circumstances. That is, only a few people succeed by continuously devoting themselves to a cause and feeling their own accomplishment. Without innovation, none of the major corporate empires that rose to the top would have accomplished such exceptional success. So, we need to share their cases and learn even from their failed challenges by summarizing their performances. Earlier this year, Starbucks stopped selling beer and wine at 439 stores in the U.S. Gradual innovative attempts will lead a corporation closer to success. Innovation is not something we speak in words alone, but something we must practice through our actions. If we can make a small change and revitalize our job and life, then I strongly believe we can go hand in hand with our corporation to achieve our grand and far-reaching goal of becoming a Great Company.
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