Luckin Coffee Eyes Southeast Asia Expansion and Opens 500 New Stores in China

The largest coffee chain in China, Luckin Coffee is reportedly eyeing overseas expansion in Southeast Asia. According to industry sources, during the course of its expansion spree, luckin coffee Inc will target cities popular among Chinese tourists in Indonesia, Singapore and Thailand as potential markets.

Luckin Coffee has also announced plans to aggressively increase the number of franchised stores it operates across China, especially among the lower-tier cities. Given the fact that approximately 70% of China’s 1.4 billion population live in third- and fourth-tier cities. Luckin coffee which earlier focused on large, densely populated first and second tier cities for expansion, such as Beijing, Shanghai, Guangzhou and Shenzhen, Luckin Coffee is aggressively pushing for growth by accelerating outlet growth with a focus on China’s third and fourth-tier cities.

According to industry reports, it plans to increase luckin coffee outlet from the 8,360 stores that it has towards the end of 2022 and add 478 new stores in January. The locations for the new stores will likely include Qinzhou, Jiamusi, Songyuan, Baotou, Tongliao, Panzhihua, Xishuangbanna, Pu’er, and Sanmenxia. 

Recently, Luckin Coffee Inc. posted 66% year-on-year revenue growth to reach RMB 3.9bn ($547.5m) in its third quarter.

Unlike its nearest rival, Starbucks, whose expansion strategy is based on real estate whereas Luckin Coffee’s DNA lies in technology. Additionally, it’s digital-first marketing strategy is smartphones-led and is focused on tapping into consumer's social circle, offering heavy discounts directing customers' attention to their mobile and ordering through the app. 

The digital-first company, which operates a significant proportion of delivery and pick-up-only stores, has credited its app and delivery model as enabling it to meet increasing consumer demand. Luckin's stores are mostly grab-and-go. In fact, 91.3 percent of luckin coffee outlet are small kiosks with limited seating. Consumers order on the app, come and grab their coffee in the store and go. In-fact any of its stores are in less-bustling locations that few would pay attention to unless their Luckin app directs them to it.

The digital-first strategy translates into a cheaper business model and helps keep operational costs low. This in turn enables it to expand faster and avoid the time and money that it otherwise would need to spend on renting and refurbishing stores.

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