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Starbucks Continues to Expand Digital Order Services in China

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Starbucks Corporation (SBUX - Free Report) is leaving no stone unturned to reach to more customers in China. Starbucks lovers in the country can now place orders via multiple Alibaba Group Holding Limited’s (BABA - Free Report) apps. Starbucks has introduced its mobile order and pay feature — Starbucks Now — to multiple platforms in the Alibaba Digital Economy, which includes Taobao, Amap, Koubei and Alipay.

Starbucks customers can use Starbucks Now feature to pre-order and pay for their favorite Starbucks beverage and food online before in-person pick-up at local stores. This will help Starbucks in expanding presence in China as Alibaba Digital Economy has user base of nearly 1 billion. Notably, Starbucks sales have declined sharply owing to the pandemic. Hence, it comes as no surprise that the company is making every move to recover sales.

In 2018, Starbucks announced partnership with Alibaba in order to provide a seamless Starbucks Experience in China and drive growth. Starbucks began delivery services in Beijing and Shanghai via Alibaba's Ele.me platform. The company announced that it has surpassed its goal of expanding Starbucks Delivers presence to 3,000 stores in 100 cities by the end of fiscal 2019. Starbucks' business in China is rapidly growing courtesy of innovative store designs, local product innovations and the success of MSR program.

Starbucks has been focusing on expanding delivery services globally. In fact, the company has online delivery services in China, Japan, India, Hong Kong, Singapore, Indonesia, Vietnam, Mexico, Colombia and Chile. These efforts are aimed at capitalizing on the robust online food delivery market.

China: A Key Market

China is the fastest growing market for Starbucks. Improving customer experience via innovative new store designs, upgrading product offerings and margin expansion through process and supply chain efficiencies are driving performance. China has witnessed comps growth of 1%, 3%, 6% and 5% in the first, second, third and fourth of fiscal 2019, respectively.  In first-quarter 2020, China delivered comps growth of 3%. Although comps declined in second-quarter fiscal 2020 due to the coronavirus outbreak, China still remains one of the most important markets for the company.

Management believes that China and the Asia-Pacific region will drive business growth over the next five years supported by rapid unit growth, growing brand awareness, and increased usage of the digital/mobile/loyalty platforms.

Shares of Starbucks have fallen 14.7% year to date, compared with the industry’s decline of 6.4%.



 

Zacks Rank & Key Picks

Starbucks currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space include Dine Brands Global, Inc. (DIN - Free Report) and Yum China Holdings, Inc. (YUMC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings in 2021 for Dine Brands are expected to soar 206.6%.

Yum China surpassed estimates in each the trailing four quarters, the average surprise being 62.9%.

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