Insight leads to strategy leads to market share

Chinese rarely drink coffee.

This fact makes it strange to think that Starbucks wants to make China its second-largest market. There are, of course, secondary goodies and localized products that can attract customers, but without a strong caffeine addition, Starbucks value proposition becomes shaky, at best.

This is why Starbucks’ primary value prop in China isn’t coffee. It is space.

Some 25 years or so ago, Starbucks helped invent the concept of the “third space” — a place that’s not a home and it’s not work either, but it’s in between, offering ability to do work within comforts alike those at home. Now this brand is brining the same premise to crowded Chinese metropoles.

Starbucks is keeping the steady flow of traffic to its bars with the promise of a well-lit, comfortable, pleasant-yet-not-intimidating space where one can hang out with friends, do some work, read a book or have a meeting. The latter is increasingly common among Chinese fast-growing class of business people, who prefer meeting in Starbucks instead of their cramped offices.

A comfortable setting can be a powerful habit-forming situation. While the primary reason to visit Starbucks for Chinese right now is not coffee, the entire setting of Starbucks may nudge them into coffee-drinking direction. Something like: meeting a need you didn’t know you had.