Digital coffee

Online ordering systems are nothing new, but, unlike the typical coffee shop, Luckin was completely designed around the concept. This “new retail” company has strategically opened its locations based on data that shows where customers are most likely going to want a coffee fast, such as near offices—that means nearly half of its outlets act solely as delivery hubs, promising a hot cup of joe delivered to the customer within a half hour. Other Luckin branches boast tables and chairs, but still don’t have menus, so customers are free to order on their app ahead of their arrival. The approach is similar to that of Alibaba’s Hema supermarkets, or Amazon’s collaboration with Whole Foods in the United States, both of which also follow the “new retail” model, which aims to sync the best of online and offline retail.

In contrast, Starbucks has been focusing more on offline customer experience, as café culture in China makes a notable shift from tea to coffee obsession. Last year, it opened its biggest outlet in the world, the Starbucks Reserve Roastery in Shanghai, before unveiling its second-largest flagshipthis summer in Beijing. But more recently Starbucks, under pressure from players like Luckin, has been ramping up its digital convenience for customers. It already has a major presence on WeChat and announced earlier this month that it would be launching a “new retail” partnership with Alibaba to offer online delivery.

While Luckin is by far the best-known café in this digital space, it’s not the only one. Shanghai startup Ratio replaces its baristas with a robotic arm that creates the perfect cup of brew—or cocktail—once a customer scans a QR code on a sign at the café’s entrance. The QR code takes customers to a menu app on their phone, where they can customize their coffee’s strength, water content and sweetness. Ratio’s founder Gavin Pathross is the former chief digital officer at Yum China, which operates KFC and Pizza Hut, among others. He opened Ratio in K11 mall this summer after noticing that, in cafés, “there’s a lot of excessive interaction that’s not meaningful to customers.”

It’s unclear whether these ventures are here to stay, but China’s digital ecosystem has already made a significant impact on the country’s dining scene, especially when it comes to mobile payments. At the ordering kiosks rolled out by McDonald’s in its Chinese (and American) outlets, customers can avoid the line and pay by scanning their phone using WeChat Pay or Alipay—KFC and Pizza Hut also have similar initiatives. Mr Meng, a sit-down noodle restaurant chain owned by Meng Fei, the host of a popular reality dating show in China, features an intuitive online menu app that can be accessed by scanning a QR code at the table. Once dishes are ordered and paid for, a busser, not a waiter, brings customers their meal.

Mobile ordering and payments are beneficial for businesses that want to cut costs, a spokesperson for mobile payment giant Alipay tells JWT Intelligence. “A significant chunk of these chain brand restaurants are already using a QR code-based ordering system on mobile phones, which drastically reduces the need to use human labor to do repetitive tasks,” he says. “This increases their profit margin and helps them to survive the extremely cutthroat restaurant industry in China.”