What is the growth logic behind Luckin Coffee which listed in the US: 16.8 million customers, 2,370 stores?

Posted by zaiwu 23/04/2019 0 Comment(s) Doing Business in China, Digital Marketing in China,

     On April 23, Luckin Coffee, a Chinese start-up aiming to challenge Starbucks' dominance in China, has filed for an initial public offering prospectus (IPO)in the us.The beijing-based company that has filed to list on Nasdaq under the ticker symbol LK.The company plans to raise $300 million in the IPO.

 

     As of March 31, the number of Luckin Coffee’s stores had reached 2,370, according to the prospectus.In 2018, Luckin Coffee in China sold about 90 million cups of coffee with total net revenue of 840.7 million RMB.

 

   A week ago, the company raised $150 million in series B funding, valuing it at $2.9 billion, up from $2.2 billion at the start of 2019.

 

    Luckin Coffee launched a digital Coffee model in Beijing in January 2018. Customers can place an order through an app and then watch the process of making and delivering the Coffee via live video for no more than 20 minutes.This focus on technology, discounts and delivery, along with deep discounts and special offers, has helped the company grow quickly.Lucky now operates 2,000 stores in China, including passenger terminals, cafes and small catering kitchens, and plans to open 4,500 by the end of 2019.The move will make it the largest coffee chain in China.

 

In the first half of 2018, the online "blue" cup of Luckin Coffee created a blue whirlwind through WeChat's circle of friends advertising, focus elevator advertising, APP sharing and free drinks.Rival starbucks now dominates China with more than 50 per cent of the market, compared with fortune's 2.1 per cent share last year.Starbucks now has more than 3,600 stores in China, with one opening every 15 hours.China remains the brand's fastest-growing market, with plans to open 6,000 stores nationwide by 2023.

 

To be sure, both in terms of customer acquisition cost and customer volume, Luckin Coffee has achieved considerable growth.So far, Luckin Coffee has over 16.8 million customers.In terms of customer acquisition costs, Luckin Coffee's per capita income dropped from 103.5 RMB in the first quarter of 2018 to 16.9 RMB in the first quarter of 2019.Promotion fees dropped to 6.9 RMB from 15.8 RMB, and the average number of monthly customers increased to 4.4 million from 4.3 million in the fourth quarter of 2018.

 

"The traffic dividend of China mobile Internet is gradually disappearing.Toutiao mobile Internet giants have formed and monopolized various traffic sources, resulting in high traffic costs, which are followed by the continuous increase of customer acquisition costs.This has become the first sore point for entrepreneurial brands and Internet marketing."--" flow pool"

 

It was Domatters had to say that the performance of lucky coffee is really impressive.In this increasingly difficult to access the flow of the current, how to achieve effective growth is a thorny issue facing all enterprises.

 

User growth becomes an increasingly valuable skill

 

Since last year, the concept of user growth has become more popular and the jobs created have become more valuable.Many companies now even have chief growth officers and dedicated growth teams.Growth has become a fundamental way of thinking.

 

According to mainstream recruitment websites, many leading Internet companies, including BAT, Meituan and toutiao, are eager for growth talents, and even offer annual salaries as high as 480-750,000 RMB.

 

 

The more the population, flow, capital dividend shrink, the more growth is valued moment.Personal growth leads to more opportunities and possibilities for career development.Enterprises can do well in growth, can stand out in the industry.

 

User growth is not just about pulling in new users

 

But according to the relevant industry research results, the current domestic growth of users are almost half way out.More practitioners lack systematic knowledge and experience, and even the understanding of growth is still a big misunderstanding.Among them, many think user growth is to do fission, as much as possible to obtain new users, the traffic will be successful.This ignores the fact that "traffic" does not equal "users" and "users" does not equal "customers".

 

An enterprise's users are like a pool of water, which is refilled not by continuously injecting new water, but by seeing whether the water leaks out more slowly than the new water is injected.So even for companies like Luckin Coffee that are trying to pull off phenomenal success, user activation and retention are the core competencies they need to build.According to the analysis of the industry, with good pull new strategy, Luckin Coffee in the store by leaps and bounds, but did not see effective retention strategy.

 

According to the prospectus, the overall monthly retention rate of Luckin Coffee users is below 40%.Most people go to fortune for their first drink because it's free.However, their normal price is 27 yuan a cup, which is not much cheaper than 33 yuan a cup of starbucks. There is no obvious price advantage.Without coupons, more than 50 percent of new users leave, according to the data disclosed.In addition, Luckin Coffee mainly outside the sale and take - away - based, there is no good food environment.For most Chinese users who are used to drinking coffee or talking about things and meeting friends, it is hard to attract them.

 

Of course, facing the coffee market dominated by starbucks, Luckin Coffee's first priority in the first stage must be to attract new customers. If there is an effective activation and retention strategy in the later stage, Luckin Coffee may become a large enterprise competing with starbucks.In fact, user growth is not limited to the part of the customer, but based on supply and demand analysis, from the user's whole life cycle to find growth, so that you continue to find growth methods.

 

Develop systematic and mature growth thinking

 

 

In addition to paying attention to the cultivation of "art", more attention should be paid to the improvement of "tao" in user growth. In combination with the particularity of domestic Internet industry, a set of systematic and mature growth thinking should be cultivated.

 

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