For China’s urban population, digital payment services are everywhere. Many people use mobile apps to order and pay for products, including coffee, almost every day.
WeChat and Alipay are the two most popular payment providers in the country. They also both have their own respective food and beverage delivery services: Meituan (美团 in Chinese) and Ele.me (饿了么 in Chinese).
Covid-19 naturally accelerated the growth of the global food and beverage delivery market. However, these delivery services – known as waimai (外卖) in Chinese – were already an indispensable part of everyday life for many Chinese consumers.
Felipe Cabrera is the CEO and founder of Ad Astra Coffee Consulting in Shanghai. He has been working in the Chinese coffee industry since 2015.
In this article, he explores why coffee delivery services in China are popular and how they are influencing the country’s wider coffee market.
You may also like our article on ecommerce & coffee in China.
When did the coffee delivery market first emerge in China?
Many independent coffee shops in China’s larger cities have been providing delivery services for some time now. However, these services became much more widespread when Chinese chain Luckin Coffee launched its delivery service in 2017.
Despite opening its first stores in 2017, Luckin currently operates more locations in China than Starbucks. In comparison, Starbucks first launched in China in 1999.
Like many large coffee brands, offering delivery services has played a major role in Luckin’s success. There are no cashiers in any of Luckin’s coffee shops. Instead, customers place their orders through the chain’s mobile app, before opting for either pick-up or delivery.
Other Chinese coffee brands have imitated Luckin’s delivery-focused business model, but with less success. One example is Coffee Box, which had several popular stores in Shanghai between 2018 and 2019. However, Coffee Box closed most of its stores in 2020 – most likely because of the pandemic.
However, larger coffee chains in the country have launched delivery services with notably similar levels of success to Luckin. Starbucks China started its deliveries in late 2018 through a partnership with Ele.me. McCafé and Tims China have since launched their own delivery services.
But while larger chains have helped to establish the Chinese coffee delivery market, it is mostly independent coffee shops that are providing these services.
According to data from Deloitte, there are around 108,500 coffee shops in China. In December 2021, Luckin operated around 5,671 stores, while Starbucks China had some 5,400 locations.
This means that smaller independent cafés represent some 87% of the country’s coffee shop market, while larger chains like Luckin and Starbucks collectively have around a 10% market share.
As China’s coffee consumption grows at a staggering rate, evidence suggests that both commercial chains and specialty coffee shops are influencing how people consume coffee in the country.
Why are these services so popular?
Although coffee deliveries are mostly used in China’s “first tier” cities (such as Beijing, Shanghai, Guangzhou, and Shenzhen), these services are becoming increasingly popular in “second tier” and “third tier” cities.
One of the main reasons for the growth of the coffee delivery market is convenience. Instead of visiting coffee shops, customers can place orders through delivery apps. In Luckin’s case, delivery is guaranteed within 30 minutes.
Customers can also select their beverage preferences on these apps, such as choosing a roast or adding sweetener.
Smaller coffee shops, meanwhile, use the Chinese social media ecosystem to promote their products and offer discounts exclusive to delivery customers.
Platforms like WeChat, Red (小红书 in Chinese), and Chinese TikTok (called Douyin or 抖音 in Chinese) advertise on delivery apps like Meituan, Ele.me, and Dazhongdianpin (大众点评 in Chinese). WeChat alone has over one billion active users per month – meaning these coffee shops are able to reach a staggering amount of potential customers.
However, it’s not only consumers who benefit from using coffee delivery apps.
By analysing the data collected from delivery apps, coffee shop owners can keep track of the number of coffee deliveries per day. They can also see which beverages are the most popular, which can help to further promote these products.
Moreover, coffee shop owners can also use sales data to adjust stock levels and potentially cut down on coffee and milk waste.
Customer feedback is also useful for business owners. Delivery service apps allow users to leave ratings and reviews of their orders and the overall experience.
Millennials and coffee delivery
The majority of coffee delivery service users in China are between 22 and 39 years old – meaning a majority of them are millennials. Generation Z (the generation that directly follows millennials) generally prefer to visit coffee shops to socialise with friends.
In each of China’s first tier cities, millennials have their own unique coffee purchasing habits. However, there are general trends across the country’s coffee delivery markets.
In most cases in these cities, young professionals order coffees through these apps on average two days every week, if not everyday. Thanks to the fact that they have an average higher disposable income than previous generations, Chinese millennials are helping to drive the growth of the coffee delivery market.
Customers place most of their coffee orders between midday and late afternoon. Deliveries are often to offices, as young working professionals find it more convenient than visiting coffee shops.
Group orders to offices are also common, as customers will place orders for their colleagues as well. Typically, larger orders result in bigger discounts, as many smaller coffee brands need to remain competitive. In line with that, coffee shops which offer more promotions generally attract more customers, who are then incentivised to place larger orders.
In most first tier cities, milk-based drinks, such as lattes, remain the most popular options. In other cities, similar coffee consumption patterns are becoming more prominent, too.
Influence on the wider Chinese coffee market
Since the beginning of the pandemic, many small coffee shops in China have relied heavily on delivery services to stay in business. The country’s current zero-Covid policy is forcing around half of Shanghai’s population to remain at home at any given time. This is undoubtedly reducing foot traffic in many of the city’s independent coffee shops.
During the first quarter of 2020, many coffee shops in first tier cities such as Shanghai closed because of Covid-19. However, by the second quarter of the year, most of these shops had reopened under new management.
When they reopened, many of these new cafés focused on deliveries and takeaways to increase sales. And as the pandemic has continued, most coffee shops have no choice but to strengthen their online presence and scale up their promotion of both products and delivery services.
Rising commercial rent prices in cities like Shanghai have also pushed more coffee shops to favour delivery services over hosting customers in-store. Typically, an independent coffee shop in Shanghai will measure no more than 25 square metres (or even smaller), with only a few tables available to customers. Delivery and takeaway services help these smaller shops boost revenue.
For Chinese coffee consumers, the growth in the delivery market could potentially influence consumption trends in the long-term. Customers may well expect to receive their coffees within a short timeframe and want their coffees delivered at the right temperature (whether hot or cold) – increasing the demand for faster delivery times.
Will Chinese delivery services influence other coffee markets?
Coffee delivery services have clearly already had a huge impact on China’s ever-growing coffee culture, particularly as far as the demand for convenience is concerned. But is there potential for other international coffee markets to also scale their coffee delivery infrastructure in the same way?
In 2020, grocery and food delivery apps were among the fastest-growing categories in the world. Downloads and users of food delivery apps grew by over 32% that year, as more customers used delivery services during the height of the pandemic.
In the US, top food and beverage delivery companies (such as Uber Eats and DoorDash) had a combined revenue of US $5.5 billion between April and September 2020. This is over twice the total combined revenue they made in 2019.
Global coffee sales on delivery platforms also skyrocketed during the pandemic. Uber Eats reported that the number of coffee orders on its platform increased 149% between March and June 2020. And much like in China, Uber Eats said that around the world, the latte was the most-ordered beverage on the platform in the same period.
Across the world, the growth of food and beverage delivery apps shows no signs of slowing down. Even as some parts of the world loosen their Covid-19 restrictions, it appears that ordering coffee for delivery has become something of a norm for many consumers.
Although coffee delivery services are common in many countries, the sheer, unparalleled growth of China’s delivery market is a solid example of how coffee shops can utilise these systems to their advantage.
By offering discounts and using social media platforms to promote products, Chinese coffee shops are driving up their sales across the board.
But will other international markets follow suit in the long term? Will ordering coffee from our phones become the norm around the world? There’s no answers to these questions at present, but it will certainly be interesting to see how other coffee consuming countries adapt.
Enjoyed this? Then read our article on the rise of coffee livestreams in China.
Photo credits: Felipe Cabrera
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