Starbucks – After decades championing “the third place“, Starbucks has been experimenting with newer store formats. Initially the company moved upmarket with their Reserve/Roastery formats. This one is from the Seattle location:
While the move upmarket feels quite natural for a company that has focused so heavily on building a well-recognized and beloved brand, the recent experimentations with smaller, more convenient stores is an interesting one:
What’s interesting is that Starbucks is experimenting with these smaller stores after having been outgrown by an aggressive Chinese competitor named Luckin. Luckin Coffee pioneered a digitally-operated, small store format less than 3 years ago in China. In less than 3 years, Luckin now has more stores than Starbucks in China despite Starbucks building stores for 20 years.
How does the Luckin model work?
Luckin’s whole strategy is to offer decent quality coffee at a much lower price. In order to compete with Starbucks on quality and price, Luckin needed to devise a new model without sacrificing the inherently good margins that a cup of coffee earns. The company eventually settled on a digital-driven strategy centered around their app. By requiring all users to transact through the app, the company was able to cut out sales staff at the stores. Not only does this reduce personnel cost, but also space required. In addition, Luckin stores are all pick-up formats which further reduced the space required. With an app-driven sales model, stores no longer need to be placed at the most visible locations. All of these things meant savings on labor and rent that could be passed through to the consumer in the form of lower cost but with (eventually) similar margins to Starbucks.
While the Luckin model has turned out to work better than expected, the most interesting thing is that Starbucks is learning to adapt it for their own stores in the US and perhaps other markets. Will be interesting to see where this takes Starbucks.
The linked post is specifically about Benchmark’s (a highly respected Silicon Valley VC firm) bottoms-up investing philosophy. Benchmark was one of the largest investors in Uber pre-IPO. The post includes a section that is well worth reading about why Uber is one of those investments make the most sense from a bottoms up perspective. Also includes the wonderful flywheel diagram:
Uber – Uber is expanding their Uber Money efforts by setting up a 100-person team in Hyderabad, India
The team is already working on “implementing new payment methods, enabling and building financial compliance tools, leveraging smart routing technologies for payment gateways, and applying Uber Artificial Intelligence models for intelligent risk decision,” it added.
The Hyderabad-based team is expected to play “an essential role in enabling upcoming new global features and improvements, including real-time earnings, updated debit accounts, and debit cards for Uber drivers, along with Uber Wallet and refreshed Uber credit card for Uber riders.”
I’m quite attached to my credit card(s). I’m also quite a bit more attached to Apple Pay/Apple Wallet these days. Not sure how much headway Uber is going to make in the US on the consumer side (though I expect the driver side to see widespread adoption since it allows faster payouts). But Uber is one of the few players that is positioned to do this across a large swath of the world, especially in emerging markets where bancarization is low.
Pinterest – Pinterest continues to broaden the use cases for ecommerce
A new Pinterest feature will allow users to virtually try on products, starting with lipstick, before they shop from retailers like Estée Lauder, Sephora, bareMinerals, Neutrogena, NYX Professional Makeup, YSL Beauté, Lancôme and Urban Decay from L’Oréal. To use the new feature, Pinners will first open Pinterest’s smart camera, “Lens,” while in Search, then click “Try it” to explore the different lipstick shades available. To shop the products, you just swipe up.
Another way to access Try it is by typing in lipstick-related terms into Pinterest’s search engine — like “plum lipstick” or “red lips,” for example.
Pinterest continues to fly under the radar. Much like Instagram, Pinterest seems to be building out a very interesting product discovery platform.
As a side note, ecommerce is likely to be one of the most interest use cases for AR. The consensus still seems to be for AR to be for outside use cases while VR is for inside use cases (for which games is the only thing that seems to make sense so far). But what if the killer feature for AR is something as simple as shopping on your couch? See the items you’d like to buy right in your rooms or on you…perhaps there will also be digital sales people that can interact directly with you in your living room.
Disclosures: I own shares in UBER. I have no intention to trade any shares mentioned in the next 48 hours.