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Recently in the news, Starbucks opened a new Roastery outlet on Nanjing Road in Shanghai last week begging the question, so what?

There’s nothing surprising about a new Starbucks in China, except this is now the world’s largest one at 30,000 sqm, twice the size of its counterparts in the US and will be the first-ever to incorporate in-store augmented reality (AR), thanks to China’s most influential internet company – Alibaba.

What can consumers do in this store powered by Alibaba’s technology and Mobile Taobao app?

  • Access a detailed map of the floors and menu with Alibaba’s location-based technology
  • Save favorite Starbucks products to their Mobile Taobao account
  • Scan key features around the Roastery to get information on coffee bars, brewing methods via animations
  • Earn a customized photo filter for sharing on social media
  • Ultimately, appeal to the digitally savvy Chinese audience

Sure, China is an attractive market to invest in but what is Starbucks planning with its“most ambitious project ever”?

An augmented reality app is used in the new Starbucks Roastery in Shanghai, China. Photographed on Friday, December 1, 2017. (Joshua Trujillo, Starbucks)

Slow Growth Around the World

Starbucks second quarterly earnings reported $5.29 billion, short $120 million of the expected $5.41 billion. While the coffee giant has found great success in its 46 years because of its consistent and convenient services and products, the company has felt the squeeze of rising competition from convenience stores and fast-food chains like McDonalds aggressively improving the quality and pricing of its beverages and menu.

And so, to capitalize on a blue ocean, the company decided to focus on a region where coffee culture is only emerging

Revenue from Asia Pacific makes up almost 15% of Starbucks’ annual revenue, a 5.5% increase from five years ago.

It’s obvious to us that the holding power of China for Starbucks is going to be much more significant than the holding power of the US,” — Starbucks’ founder and Chairman Howard Schultz.

As the Chinese economy grows, Starbucks’ success does as well in a country where disposable incomes increase and the younger generation is attracted to quality-driven and unique brands that speak to who they are.

“For coffee, there’s a certain kind of ‘in-the-know’ from consumers who seek out these good boutique shops,” said Jack Chuang, partner at OC&C Strategy Consultants who studied the Chinese coffee market.

Although still predominantly a tea-drinking nation, China is rapidly developing a taste for coffee, an activity previously thought was for the affluent or Westerners.

Jack Ma’s New Retail Vision Reinforced Through Coffee

What does Alibaba get out of it?

It was as recent as Single’s Day when Jack Ma announced the ‘New Retail’ concept that aims to blur the line between conventional brick-and-mortar retail and ecommerce with the help of technology and data.

In the coming years, we anticipate the birth of a re-imagined retail industry driven by the integration of online, offline, logistics and data across a single value chain,” — Jack Ma.

Alibaba’s HEMA Supermarkets already blur the line where consumers can shop for groceries online via the HEMA app and receive them within half an hour, or scan barcodes at the store, pay via the app, and set up delivery.

A shopper can easily scan barcodes in the store and pay for the products through the HEMA app before having them shipped home. Source: Alizila

Partnering with a highly influential brand like Starbucks and providing them with the right technology is Ma’s push for even faster digital adoption..

A survey has shown that 40% of consumers are willing to pay more for a product if they could experience it through AR, and 71% claim that they would shop at a retailer more often if they offered AR.

Seems like Starbucks and Alibaba will be brewing some heavy money in China.

Here’s what you should know today.

1. Jack Ma is reportedly set to explore joining $1.5 billion fundraising round for Grab

Alibaba co-founder Jack Ma may team up with SoftBank Group Corp.’s Masayoshi Son in a $1.5 billion investment in ride-hailing startup Grab.

The Ma investment, which may come from either Alibaba Group Holding Ltd. or payments affiliate Ant Financial, would bring his competition with arch rival Tencent Holdings Ltd. to Southeast Asia.

An alliance with Grab would let Ma market Ant Financial’s digital payment service, Alipay, to millions of riders in the region, where Tencent has already partnered with Grab’s biggest competitor to promote its own payment service.

Tencent and Alibaba are entangled in a battle to lure more people to use their digital wallets both in China and internationally, and ride hailing is an important channel to help them win market share. The Singapore-based startup already has a partnership with Ant Financial, under which riders can use Alipay through the Grab app.

Read the rest of the story here.

If true, then Jack Ma could very well use Grab to consolidate further presence in Southeast Asia, hereby having a hold on the platform’s digital payments services. It would also prove that Chinese companies are using the region as their next battlefield for power. For more on this, check out eIQ’s take on the big Chinese powerhouses here.

 

2. Messaging startup Slack said to draw interest from Amazon

Corporate chatroom startup Slack Technologies has received recent inquiries about a potential takeover from technology companies including Amazon.com.

A deal could give San Francisco-based Slack a valuation of at least $9 billion

An agreement is not confirmed and discussions may not go further. Slack has 5 million daily active users — 1.5 million of whom pay to use the service — and had $150 million in annual recurring revenue as of Jan. 31. A potential acquisition would mark some consolidation in the space, hereby going against Google Hangouts, Microsoft’s Office 365 and more.

Thoughts?

Read the rest of the story here.

 

3. Recommended Reading: Dunkin’ Donuts integrates Masterpass with mobile app, loyalty program

Dunkin’ Donuts has integrated Mastercard’s Masterpass into its Dunkin’s Mobile App, allowing customers to use the digital payment service to purchase and reload virtual Dunkin’ Donuts cards on DunkinDonuts.com and on the app.

The key word there is “loyal,” as Dunkin’ Donuts is primarily focusing its newest mobile efforts on members of its customer loyalty program.

Taking care of your most loyal customers is never a bad idea, and Dunkin’ Donuts reportedly has about 6 million DD Perks program members who are responsible for more than 10% of the company’s revenue. Still, that’s far fewer than the roughly 13 million people who are Starbucks Rewards members, so Dunkin’ Donuts has some catching up to do.

Although a smaller program membership may help Dunkin’ Donuts avoid the in-store traffic congestion problems that Starbucks had when its Mobile Order Ahead & Pay feature proved to be too popular.

Read the rest of the story here.

Mobile payment apps, widely known as mobile wallets, hold digital information about credit and debit cards for making payments, store coupons and loyalty programs.

And they’re projected to become a $300 billion industry by 2022 in the US. Market research firm Park Associates estimates that proximity payment transactions, which require users to tap their phone at a point-of-sale station, generated more than $30 billion in the US last year alone.

The following are a few examples of companies properly utilizing their own mobile payments apps:

One player that stands out is global coffee chain Starbucks.

Currently 2X as many consumers use Starbuck’s mobile app as Apple Pay, according to Park Associates.

Other brands such as New York based Fresh & Co, a grab and go cafe chain, have been using mobile wallets since 2014 and currently has 30,000 customers paying for their sandwiches via the company’s own mobile app.

US drugstore chain CVS also operates a successful mobile payments app by incorporating its ExtraCare rewards program. Users don’t have to produce a rewards card to earn points at the cash register, they’re transferred directly to the app.

Users can also manage multiple prescriptions and medication refills on the app.

But not all mobile wallets are providing a good return. Walmart’s mobile payment app, Walmart Pay, can serve as a cautionary tale for retailers looking to launch digital wallets. The app is reportedly underperforming, due to the absence of a loyalty rewards scheme for users.

Overall, there is a quick and widespread adoption of mobile payments in the US and has largely attributed to the rise of ecommerce – currently 11% of retail sales in the country.

Looking east, brands and retailers in Southeast Asia can also leverage mobile wallets, especially as the adoption of the smartphone among the population grows. A problem arises when considering approximately 74% of Thai shoppers prefer to pay for online shopping via cash or bank transfers and is also the case in Indonesia and the Philippines. This is because only 27% of the entire region has a bank account let alone a credit card to pair with a mobile wallet, but there are a few ways around this.  

Businesses can allow consumers to top-up their mobile wallets at the store counter using cash like Starbucks already offers as an option. Points collected in the app could also be used like a digital currency to purchase goods. All would nurture the adoption of digital payments in the developing region – a large obstacle in the growth of online retail.

Ecommerce giant Amazon is tackling the unbanked population in the US through its Amazon Cash initiative that allows users to top-up their Amazon cards with cash at selected brick and mortar stores, such as drug store CVS, across the country.

The appeal of mobile payment apps for consumers

Building a mobile payments app may be expensive, at least $20,000, but it will introduce customers to the built-in loyalty programs, which will incentivize them to return to collect more points through purchases in a positive feedback loop.

In some cases, it has been found that loyalty programs can work in tandem with increasing brand awareness i.e. if a consumer shares a product with 20 friends, they get 20% off their next purchase.

“Across the board, consumer satisfaction is about 80%for mobile wallets,” says Chris Tweedt, mobile-payments analyst at Parks Associates.

Marketing tactics like this would work in Southeast Asia as consumers are both mobile and social media driven.

In the US, merchants also see a 7-9% larger basket size when customers pay with a mobile wallet and businesses see an additional 9% spike in average sales when customers show up to redeem loyalty incentives. The added convenience makes on the whim-shopping much easier.

With a brand’s own payments wallet, they can dictate what payment types to accept, such as Alipay or Samsung Pay, but they need to be widespread and so far the region doesn’t have a dominant player yet, which becomes the greatest barrier to its adoption.

It’s also important to keep in mind that retailers using third party wallets such as Apple Pay or Alipay have to pay processing fees for each purchase, typically 2-3% for credit cards and less than 1% for debit cards according to Amittabh Malhotra, CMO of digital commerce platform OmnyPay.

Taking the next steps

Businesses in developing markets can start small as more payments players come onto the scene by opening a point program first to build engagement if a mobile wallet seems out of reach.

The long-awaited entry of China’s dominant payments platform Alipay in Southeast Asia through deals with Thailand’s TrueMoney and Indonesia’s Emtek, owner of Blackberry, should encourage the mobile wallet ecosystem as brands can then integrate more digital payment options into their platforms.

Another players to look out for is the Thai government’s online payment platform PromptPay that has signed millions so far and could be huge if advertised properly to the cautious Thai people.

Starbucks in Thailand is moving quickly in the game. The coffee chain already has a Starbucks Thailand app that allows users to scan and pay through collected loyalty rewards and locate the nearest branch. A mobile wallet is about convenience – it’s not only about payment – and only a few businesses are getting it right.

The $300 Billion Trend Your Company Needs to Get in on Now was originally published by Inc. Read the original article here.

Here’s what you need to know.

1. Rocket-backed Global Fashion Group still not profitable

Global Fashion Group, the umbrella group that holds Rocket Internet-backed online fashion businesses worldwide, saw its revenue hit the US$1 billion mark in 2016, but it was still bleeding cash.

GFG recorded a net revenue of $1.09 billion last year, a 26% jump from $862 million in 2015.

Profitability remained elusive for the group as it posted $136 million in operating losses. However, the losses were much less than what was posted in 2015.

The pressure is on for the fashion group to further cut its losses or break even, otherwise it’s likely to continue to hurt Rocket.Rocket’s 2016 full-year numbers are expected to come out later this month, but its nine-month report pegged its losses for the period at nearly US$700 million due to the slump in GFG’s value.

Read the rest of the story here.

 

2. Vietnam’s Appota raises Series C, valuation closing in on $50m

Appota Group, a Vietnamese mobile-based platform company, announced that it has closed an undisclosed Series C round from Korea Investment Partners and Mirae Asset Venture Investment.

Appota is best known as a mobile game publisher and ranks in the top-three for Vietnam.

However, the company is also pursuing adtech and fintech. It has a mobile advertising platform called Adsota and mobile payments platform named Appota Pay. The company plans to accelerate both with the Series C.

Read the rest of the story here.

 

3. AdAsia, an ambitious one-year-old ad tech startup, raises $12M for expansion 

AdAsia, a one-year-old online advertising startup based in Singapore, has closed a $12 million Series A round from Japanese investor JAFCO.

The company grossed $12 million in sales between April and December 2016, growing at 20-30 percent each month. On the tech side, the Series A will be used to develop AdAsia’s machine learning and artificial intelligence capabilities within current and future ad products by establishing a development center in Vietnam.

Read the rest of the story here.

 

4. Starbucks is testing out a mobile order only store

The coffee giant is looking for ways to make mobile ordering work better, and in pursuit of that goal it’s going to trial a location that exclusively serves mobile order customers, within its own Seattle HQ.

All mobile orders from building employees, which include 5,000 people, will be routed to the new location, and it’ll feature a different design, with a prominent pick-up window that also offers a view to baristas preparing the orders.

Read the rest of the story here.

 

Before you start the day, check out the top ecommerce headlines.

1. Worldpay predicts credit-card decline

For its Global Payments Report 2016, Worldpay analysed 30 ecommerce markets including Singapore and Malaysia. For Singapore, Worldpay found that although credit cards hold a 60% of the payments market, this is expected to slide to 36% by 2020.

Debit card use is expected to double to become 18% of the total payments market, while cash on delivery and bank transfers will represent 18% and 17% respectively. E-wallet growth is likely to remain relatively flat.

Read the rest of the story here

 

2. Two renowned angel investors set up $7m venture capital firm for Southeast Asia and India

William Klippgen and Michael Blakey will be heading the VC firm, Cocoon Capital. They will focus on seed and pre-series A investments, and will sign checks ranging from $250,000 to $700,000 in Southeast Asia and India.

The firm will specifically back software-as-a-service, ecommerce, and fintech startups.

Read the rest of the story here

 

3. Starbucks enables social gifting with WeChat in China

The Seattle-based coffee giant will partner with Chinese tech giant Tencent to co-create a new social gifting feature on WeChat, the messaging app used by 846 million people per month. It will allow customers to give Starbucks products to friends using WeChat in China, which has become a key market for Starbucks.

The coffee giant also announced that customers in China can also now use WeChat Pay, the app’s mobile payment system, to buy products in store.

Read the rest of the story here

Here’s what you need to know for today.

1. Starbucks launches mobile payment app in Indonesia

Starbucks recently launched a mobile application in Indonesia to allow customers to pay for in-store purchases at the coffee marker’s more than 260 stores across the country. The new Starbucks Indonesia Mobile App for iPhone and Android allows customers to quickly pay for in-store purchases by scanning the barcode linked to a registered Starbucks Card.

Read the rest of the story here

 

2. Mobile payment gaining in popularity among consumers in Thailand

Around half the smartphone owners in Thailand are already using some form of mobile payment via their devices, according to a survey. The survey involving 2,000 respondents by mobile marketing research.

Read the rest of the story here.

 

3. UPS launches chatbot

The UPS chatbot, available through Facebook Messenger, Skype and Amazon platforms, provides users with a convenient and conversational interface that is different from those offered on the UPS website or UPS mobile apps.

Read the rest of the story here