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Positive Comments: Luckin’s “Chinese Model” Introduces New Variables to the US Coffee Market
Luckin’s move into the US market is essentially an important trial of the globalization strategy of Chinese new – consumer brands. Judging from the performance of its first store in New York and its core strategies, Luckin’s “Chinese Model” has shown remarkable competitiveness in the overseas market, mainly in the following aspects:
I. Efficiency Advantage of Digital Operation, Reinventing the Coffee Consumption Experience
Luckin’s digital gene is the key weapon that helped it defeat Starbucks in the Chinese market, and this ability still has the potential to be replicated in the US market. As reported in the news, customers at the New York store rely entirely on the mobile app to place orders, and it only takes 3 – 4 minutes from ordering to picking up the coffee, which is far more efficient than traditional coffee shops. This “cashier – free” model not only reduces labor costs (domestic data from Luckin shows that when the number of cups sold increases by 60%, the number of employees only increases by 33%), but also enables personalized recommendations and dynamic pricing through accurate capture of user behavior data. For example, the $1.99 coupon for coconut latte automatically issued in the app is essentially a targeted subsidy based on users’ consumption habits. It can quickly attract new customers and provide a basis for subsequent product adjustments through data accumulation. This “technology – driven operation” model forms a differentiated competitiveness in the US coffee market (dominated by Starbucks’ “third – space” concept and Dunkin’s “affordable and convenient” approach), and is particularly attractive to the young and efficiency – conscious Generation Z consumers.
II. Cost – Control Ability through Supply Chain Integration, Supporting the High – Cost – Performance Positioning
The “vertically integrated supply chain” that Luckin has built in the Chinese market is the core barrier for its low – price and high – quality products, and this advantage still has room to play in the US market. As the news mentioned, Luckin directly sources coffee beans by skipping traders (accounting for 40% of China’s imports of Brazilian beans) and builds its own roasting factories (saving 10% – 20% of the premium charged by third – parties), thus maintaining a cost advantage even when global bean prices are rising. Although the US is a major coffee – consuming country with a highly developed supply chain, Luckin’s large – scale procurement and vertically integrated capabilities can still form a certain advantage in raw material costs. For example, the listed price of the coconut latte at its New York store ($4 – 7) is higher than that at McDonald’s ($2.39), but the perception of “high cost – performance” conveyed through the opening – period coupon ($1.99), combined with product innovation (such as fruit – flavored special blends like “Dreamy Strawberry” and “Pink Sunrise”), has successfully attracted the middle – tier customer group who “want good – tasting coffee without spending too much”. Ren Yi, a senior director at Qichen Capital, also confirmed this point in his analysis: Luckin is not positioned as a “low – end” brand, but rather precisely targets a niche market through its differentiation of being “cheaper than Starbucks and offering more product variety than Dunkin”.
III. Product Innovation and Marketing Tactics, Aligning with the US Young – Consumer Trend
Luckin’s “coffee – beverage” strategy is highly consistent with the demand in the US market. As reported in the news, customers at the New York store prefer drinks like kale juice and fruit – flavored special blends, which is in line with the “Frappuccino – like” trend of Starbucks in the US. The demand for “basic coffee” among US coffee consumers is weakening, while the demand for “flavor – rich and photo – worthy” beverage – style coffee is increasing. While retaining its domestic best – sellers (such as the coconut latte), Luckin has added plant – based milk and fruit – flavored special blends for the US market, which not only maintains brand recognition but also achieves local adaptation. In addition, its well – known “co – branding marketing” (such as the cooperation with Duolingo) also works overseas. By partnering with learning apps commonly used by young people, it can not only increase brand exposure but also precisely reach the core customer group with “study – abroad or foreign – language learning backgrounds”. The popularity of “Luckin reviews” on social media (with user keywords focusing on “cheap” and “surprising”) also confirms the appeal of its marketing tactics to the US young population.
IV. Experience Accumulated from Previous Overseas Layouts, Reducing Market Risks
Luckin is not “blindly going global”. Its stores in Singapore and Malaysia have paved the way for the US market. These markets have certain cultural similarities with China (such as areas with a large Chinese population). Luckin has accumulated overseas operation experience by testing its digital model, product portfolio, and pricing strategy. For example, the success of the Singapore store has verified the feasibility of the “cashless ordering” model in some overseas markets, and feedback from the Malaysian market has helped it adjust product flavors (such as reducing the sweetness). This “test – and – iterate” strategy has reduced the trial – and – error cost of directly entering the US market and laid the foundation for subsequent large – scale expansion.
Negative Comments: The “Localization Trap” in the US Coffee Market, Luckin’s Challenges Are Not to Be Underestimated
Although Luckin’s “Chinese Model” shows potential, its long – term survival in the US market still faces multiple challenges, and some of its strategies may even become “fatal weaknesses”.
I. The “All – Online Ordering” Model Conflicts with US Consumption Habits, with a Flaw in User Experience
Luckin’s model of “not accepting cash and only supporting app/website ordering” has encountered direct resistance in the US. As reported in the news, some consumers on Reddit have complained about “being unable to pay in cash” and even called the customer service hotline. Some customers (such as Nathan) have straightforwardly stated that “they hope to order at the counter” and think that the “all – online model is strange”. The US is a country where cash is still widely used (especially among the elderly and some low – income groups), and consumers have high requirements for “service flexibility”. Although Luckin’s digital model improves efficiency, it sacrifices the choice of some users, which may lead to a loss of customers. More importantly, US consumers are far less accepting of the “tech – company” label than Chinese consumers. They are more concerned about “whether the coffee tastes good and whether it is convenient to buy” rather than the company’s technological attributes. If Luckin insists on positioning itself as a “tech company” rather than a “coffee chain”, it may exacerbate brand – perception confusion.
II. Fierce Market Competition, Both Price Advantage and Product Differentiation Need to Be Re – Verified
The US coffee market is extremely competitive, and Luckin’s pricing and product strategies face double – edged challenges. In terms of price, the regular price of Luckin’s regular coffee is $3.45, only slightly higher than Dunkin’s ($3.39) but much higher than McDonald’s ($2.39). Even with the coupon reducing the price to $1.99, it is only a short – term measure to attract traffic and is difficult to maintain in the long run (Starbucks’ “third – space” concept and Dunkin’s “high – frequency and low – price” approach have both formed stable customer groups). In terms of products, although Luckin has launched fruit – flavored special blends, consumers have commented that its menu “resembles Dunkin’s” and lacks unique selling points. US consumers have a high degree of brand loyalty to coffee brands (such as Starbucks’ “Starbucks fans” and Dunkin’s “regular customers”). If Luckin cannot create “irreplaceable” products (such as Starbucks’ “Frappuccino” and Tim Hortons’ “Timbits”), it will be difficult to form repeat – purchase loyalty based solely on “product variety”.
III. Difficulty in Localizing the Supply Chain, the Cost Advantage May Be Weakened
Luckin’s supply – chain advantage in China (direct sourcing of coffee beans and self – built roasting factories) relies on “large – scale procurement + integration of the domestic industrial chain”, but the supply – chain structure in the US market is completely different. The US is a major coffee – consuming country, and green – bean procurement is mainly through a mature trading system (such as the New York Coffee Exchange). As a new entrant, Luckin will find it difficult to obtain the bargaining power equivalent to “40% of imports” in a short period. In addition, labor and rent costs in the US are much higher than in China, and the cost – reduction effect of its “digitalization” may be diluted. For example, the premise of the increased per – capita output in domestic stores is low labor costs, while the hourly wage of US employees can be as high as $15 – 20, and the labor – cost savings from digitalization may be offset by high wages. If Luckin cannot establish a localized supply – chain system in the US (such as cooperating with local roasters and adjusting procurement channels), its cost advantage may gradually disappear.
IV. Fuzzy Brand Positioning, the Contradiction between “Tech” and “Coffee” Needs to Be Resolved
There has always been a controversy about Luckin’s brand positioning between “tech company” and “coffee chain”. In China, consumers are more concerned about “high – cost – performance coffee” and are more accepting of the “tech label”. However, in the US, consumers’ core demand for coffee brands is “product experience” (taste, scenario) rather than “technological attributes”. As reported in the news, US consumers are confused and even think it is “strange” that Luckin claims to be a tech company. If Luckin over – emphasizes “tech”, it may weaken the core value of its coffee brand. If it weakens the tech attribute, it may lose its edge in differentiated competition. If this positioning contradiction cannot be resolved, the brand may fail to appeal to consumers in either aspect.
Advice for Entrepreneurs: Going Global Is Not about Replication but “Localized Innovation”
Luckin’s trial in the US provides important references for Chinese new – consumer brands going global. Based on its experiences and challenges, entrepreneurs can optimize their strategies in the following aspects:
I. Respect Local Consumption Habits and Flexibly Adjust the Operation Model
The conflict caused by Luckin’s “all – online ordering” model suggests that digital tools should serve user needs rather than being implemented for the sake of digitalization. When going global, entrepreneurs should first conduct research on the payment habits (such as the use of cash in the US) and ordering preferences (such as whether consumers accept self – service kiosks/counter ordering) in the target market to find a balance between efficiency and experience. For example, they can keep some cash – payment channels or add self – service ordering kiosks as a supplement to avoid losing customers due to “rigid models”.
II. Clarify the Core Brand Value and Avoid “Label Confusion”
The controversy between “tech” and “coffee” for Luckin reminds entrepreneurs that brand positioning should revolve around the core needs of the target market. If the target market is more concerned about “product experience” (such as the US coffee market), labels such as “coffee quality” and “product innovation” should be strengthened. If the target market has a high acceptance of “technology – driven” concepts (such as Southeast Asia), the “digital efficiency” can be highlighted. Entrepreneurs need to be clear that the core value of a brand is “solving what problems for users” (such as “good – tasting and affordable” or “quick access”) rather than “what type of company it is”.
III. Localized Product Innovation, Creating “Memorable Products”
Although Luckin’s “coffee – beverage” strategy is in line with the trend, it needs to avoid “homogenization”. Entrepreneurs should conduct in – depth research on the taste preferences (such as US consumers’ preference for sweet and fruit – flavored drinks) and cultural symbols (such as co – branding with local IPs) in the target market to launch products that are “both familiar and new”. For example, Luckin could try to incorporate classic US elements (such as blueberries and maple syrup) into its special blends to create “US – limited editions” and strengthen the perception of localization.
IV. “Global Layout + Local Adaptation” of the Supply Chain, Balancing Cost and Stability
Luckin’s supply – chain advantage relies on large – scale operations, but when going global, entrepreneurs need to adjust their strategies according to the characteristics of the target market. They can adopt a “global direct sourcing + local cooperation” model: source core raw materials (such as coffee beans) through the global supply chain to reduce costs and cooperate with local suppliers for local raw materials (such as milk and fruits) to ensure freshness and compliance. At the same time, they should pay attention to the policies (such as food – import regulations) and cost structures (such as labor and rent) in the target market to avoid cost overruns due to “copying the domestic model”.
V. Drive Long – Term Operation with “Data + User Insights”
Luckin’s digital ability (accumulation of user behavior data) is its advantage. Entrepreneurs should continue this logic and collect user feedback (such as taste preferences and ordering times) from the target market through apps/mini – programs to quickly iterate products and strategies. For example, the New York store can use data to discover that “the sales of fruit and vegetable juices are high in the afternoon” and then increase relevant product categories, or optimize the “ordering process” based on user complaints (such as adding guidance for website ordering). Data – driven “test – and – iterate” is the key to dealing with the uncertainties in the overseas market.
In summary, Luckin’s entry into the US is a brave attempt by Chinese new – consumer brands to go global. Its combination of “digitalization + supply chain + marketing” has a certain potential for replication, but the challenges of localization are also severe. For entrepreneurs, going global is not about “replicating successful experiences” but about “solving new problems with localized innovation from a global perspective” – this may be the most valuable lesson from Luckin’s US trial.
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