Starbucks vs. Luckin

by Francisco Santolo
March 2020

Business Models are extremely important. Unluckily they are not well taught in main universities and their power is understated, or the way of bringing them into practice is not clear. 

This case is very interesting. Starbucks with their value proposition of "second home", invest a very relevant proportion of their costs in rent, together with an important level of investment in the stores. Does this really compensate for the higher price their customers need to absorb? For which target customers? Are the customers who use the space the customers who bring real profitability? Who are they willingly or unwillingly losing with this decision? What if competitors like Luckin appears exploiting this same fact on their advantage? How many more will leave, how will the churn rate be affected? How many of the target customers will decide to divide their purchases depending on their circumstances and "jobs to be done?"

On the other hand, you can see the difference in manpower costs (benefits like health insurance, etc.) can generate loyalty and retention -which saves recruiting costs-, translating into sincere quality service. Again, for which customers this is important? In which circumstances?

Objective ⇒ Strategy ⇒ Business model ⇒ Customer Development ⇒ Learning, iteration, pivot ⇒ Business

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