Starbucks Partners With Alibaba for Delivery, Virtual Store in China

Starbucks is teaming with Alibaba as it seeks to rediscover growth for its business in China. The partnership is wide ranging, and will cover delivery, a virtual store and collaboration on Alibaba’s “new retail” Hema stores. The delivery piece is perhaps most obvious, with Starbucks working with Ele.me, the $9.5 billion food delivery platform owned by Alibaba, to allow customers to order and receive coffee without visiting a store. The service will start in September in Beijing and Shanghai, with plans to expand to 30 cities and over 2,000 stores by the end of this year. Starbucks is also building its app into Alibaba’s array of e-commerce sites, including Tmall and Taobao.

Total Retail's Take: China represents a critical market for Starbucks, and the coffee chain is investing in the country as competition grows. By partnering with Alibaba, Starbucks taps into the online retail giant's 500 million-plus users. Starbucks has had tremendous success with its mobile app here in the U.S., and this move figures to help the brand grow closer to China's mobile-centric consumers.

"It’s hard to see how this could be anything other than great for Starbucks in the long term," says John Divine, U.S. News senior investing reporter. "The stock should be trading at least 3 [percent] to 5 percent higher Thursday on this news, especially with Asia already accounting for about 20 percent of sales and the dramatic growth of China’s middle class to consider. CEO Kevin Johnson, who took over in 2017 and had a tough act to follow after Howard Schultz, has made a savvy move here.”