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How Luckin Coffee surpassed Starbucks as China’s largest coffee chain…in just over two years

Data drives nearly every decision Luckin makes.

How Luckin Coffee surpassed Starbucks as China’s largest coffee chain…in just over two years
[Photo: Fourleaflover/iStock]
THE WORLD’S 50 MOST INNOVATIVE COMPANIES
17 Luckin Coffee

In just two and a half years since its launch, Luckin Coffee has become the largest coffee chain in China, surpassing Starbucks, which took more than two decades to achieve that status. Data informs virtually every decision Luckin makes, from store placement to pricing to supply forecasting. When Luckin enters a new market (it’s currently in 53 Chinese cities), it opens 5 to 10 “relax” stores—casual, sit-down coffee shops—and centralized kitchens from which it serves delivery orders. It entices people to download the Luckin app—users can only pay digitally—with a free cup of coffee. The company then decides where to open pickup kiosks based on customers’ location data. Once Luckin has blanketed a market, it shuts down delivery—because the economics don’t make sense for a product that sells for about $2.50—and relies solely on pickup.

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“We started as an online model, so 100% of the transactions give us data,” says Reinout Schakel, Luckin’s chief strategy officer and CFO. As of Q3 2019, Luckin’s store growth was more than 200% year over year, its customer base climbed by 413%, the number of customers who returned every month grew by 398%, the number of products they bought rose by 470%, and Luckin’s revenue increased by 558%. In January, it announced a new vending machine product, which could help it grow even faster. Luckin is still operating at a loss as it continues its rapid expansion, but its model is being copied worldwide—including by Starbucks in a New York City test.

Update: On April 2, Luckin Coffee reported that the preliminary results of an internal investigation revealed that its COO Jian Liu and people reporting to him had falsified approximately $310 million in 2019 sales. The investigation continues, and we’ll update this story as needed.

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A version of this article appeared in the March/April 2020 issue of Fast Company magazine.

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