31Ten > Research > Development > $60,000-a-week Club: Individual HEYTEA Stores Match Starbucks Shanghai Roastery Sales – For Now?

$60,000-a-week Club: Individual HEYTEA Stores Match Starbucks Shanghai Roastery Sales – For Now?

  • Posted by: Naini Singh

Cheesecap tea brand HEYTEA may be pulling in the crowds, but there’s a lot left to be done for it to cement its future in China’s lucrative yet unforgiving F&B industry.

Image source: That’s Shanghai

Topped off with thick layers of frothy liquefied cheesecake, cheesecap teas are certainly having an extended moment in China. Riding the naigai cha 奶盖茶 wave, HEYTEA continues to see healthy queues lining up at its stores more than a year after it first went viral on Weibo. As is the case with most things popular, HEYTEA receives its share of adulation, criticism, and suspicion, but it also rakes in some serious sales. Our calculations, based on available figures, tell us that individual stores easily make as much in a week as the Starbucks Reserve Roastery in Shanghai; by some accounts, even more. Each store sells anywhere between 2000-3000 cups a day. Add to that an average price of RMB 25 per drink for a conservative daily average of 2500 cups – that translates into a weekly revenue of RMB 437,500; in Dollar terms, a cool $66,000!

(Left) A staff member pours in the cream cheese mix; (right) the HEYTEA storefront in Taikooli, Sanlitun, Beijing

(Left) A staff member pours in the cream cheese mix; (right) the HEYTEA storefront in Taikooli, Sanlitun, Beijing

But that’s not where the connection ends.

Millennial founder Nie Yunchen’s love for Starbucks is apparent in the stores’ design and upmarket positioning, especially when compared to the stop-and-go experience offered by tea chains like Yi Dian Dian and Coco. From the staff’s outfits to the website, everything is reminiscent of the coffee giant, but how well does the HEYTEA experience stack up against Starbucks’?

A meteoric rise from social media fame

The aspiring “Starbucks for tea” (Teavana, who?) remained fairly low-profile for a good part of its six year history. Soon after the company secured a RMB 100 million boost in funding from IDG in 2016, HEYTEA used KOLs, limited store expansion, a calculated absence from delivery apps, and impressively long, showy queues to up its profile and attract hypebeasts.

HEYTEA’s 90-day index score on WeChat is 20% of Starbucks’ in March 2018, more than a year after it blew up online

However, Internet fame is no indicator of stable growth. The list of Chinese F&B brands that went viral in the past decade may be long, but very few have actually managed to sustain their businesses for more than three years.

A long road ahead before HEYTEA matches Starbucks’ offerings

Yi Dian Dian and Coco are incredibly successful tea chains, but it’s clear that HEYTEA wants none of that ubiquity. Instead, it’s likely aiming to preserve some level of exclusiveness and cater to a discerning clientele that would, for example, appreciate the pages of Danish-origin Kinfolk. Lifestyle magazines aside, HEYTEA’s longevity will depend largely on the experience it can offer to its customers, especially its most loyal ones. Despite having a digital native as a founder, the company’s overall customer experience (CX), including digital, is found to be lacking.

The first point of contact comes at the queue where staff hand out A5 sized menus that keep people occupied for a minute or two. The interiors serve as waiting rooms for those waiting to collect their drinks, with very few choosing to stay back. In terms of digital conversion, the cups come with QR codes leading only to the WeChat account.

E-commerce: Mostly merch; WeChat as an exclusive channel

Both offer a gift card option on WeChat. HEYTEA’s version looks similar to Starbucks’, although it does not benefit from the entry points of the mini program. Both offer near-identical gifting options:

H5 gift card purchasing from HEYTEA versus Starbucks’ WeChat mini program for gifting cards

HEYTEA has a WeChat store (but no Tmall presence) with limited SKUs and a focus on selling merchandise (umbrellas, iPhone cases, bags), while Starbucks relies mostly on their Tmall store (with no WeChat store at the moment). The other major difference here is that Starbucks’ E-commerce strategy is based on selling not only their merchandise but also drink coupons (redeemable in-store) and gift cards.

HeyTea WeChat mini program store versus Starbucks’ Tmall store

HeyTea WeChat mini program store versus Starbucks’ Tmall store

Website: Just a hub for social media QR codes

HEYTEA launched their website in early 2017, with most of it made up of static content.

HEYTEA website homepage in 2017
HEYTEA website homepage in 2018

Unfortunately, the new 2018 website isn’t a great step up. The website is quite limited, with QR codes redirecting to HEYTEA’s social media accounts (WeChat and Weibo only) and a list of store addresses. There’s no option to create an account, no E-commerce section, no location-based store locator and no loyalty program.

QR codes on the websites; HEYTEA (left), Starbucks (right)

Clearly inspired from Starbucks:

Big visuals

Menu presentation (not a lot of content, small pictures)

WiFi Portal: WeChat login, but no incentives to follow the brand

HEYTEA’s WiFi login

HEYTEA redirects users to WeChat to access its free WiFi. Though this is convenient, it foregoes the opportunity to gain user information and use a number of tactics that are available only when using an owned WiFi portal.

Furthermore, despite using WeChat-enabled login, it doesn’t issue a call to action to follow the company’s WeChat account.

Starbucks’ WiFi login

Social Media: Thrown together

Starbucks Weibo: 1.37 mn, regular posts

Starbucks WeChat (xingbakezhongguo): 1.39 mn

HEYTEA Weibo: 114k, last post two months ago (Jan 18th)

HEYTEA WeChat (HChuangcha): 985k

Source: Weibo, NewRank estimates

Starbucks has a clear-cut social media plan and a fruitful content strategy tailored for different regions. HEYTEA’s posts (on its three main web properties) are intermittent, unengaging, and scattered in terms of themes or underlying strategy. Even during the time it leveraged KOLs to improve brand recognition, the company chose to not drive traffic to its main account.

Weibo Accounts: HEYTEA (left), Starbucks (right)

What HEYTEA should consider next as a priority

 

Gaming the wait away

The experience of standing in line is boring and clearly unexploited. Buying a HEYTEA drink is no easy task, with wait times hovering around an hour on a good day and at least a few hours on the weekends. For queue-averse loyalists, concierge pick-up services like Linqu and iShansong come in handy for getting a fix of the concoctions, but this is hardly the ideal way to make a lasting impression.

Instead of handing a menu with a single QR code to the WeChat account, additional QR codes could lead to new activities that are aligned with the brand themes and incentivize the long wait times.

Customers in line could be guided to a mini program game (once the feature is officially launched by Tencent) or an H5 quiz or puzzle that rewards users with in-store discounts and access to promotions depending on the result or score.

 

Showcasing the value chain

Items on the menu could also lead to digital content-heavy pages, enticing customers to buy more than just one cup or try new flavors out. The chain boasts of high-quality ingredients, this is an opportunity to showcase their origins – how about a virtual tour of a long-running Chinese tea plantations or a lush New Zealand farm?

 

Streamlining the ordering process

Instead of making customers wait twice, first to order and then till their drink is ready, the mini program or an H5 page could serve as the actual point of sale, where customers can learn more about the drinks and customize orders by themselves. This also optimizes store space behind the counter and frees up staff members to join the others in preparing orders. By doing away with cash or card payments entirely, HEYTEA can also make itself more appealing for tie-ups to either of the mobile wallet giants.

KFC’s WeChat mini program as a complete replacement of the standard ordering process

Offering a loyalty program

Once it initiates a digital loyalty program, HEYTEA could also allow members to pre-order drinks online and select pick-up times for their nearest stores.  

Loyalty programs are a must, since they pave the way for repeat purchases and allow for personalized delivery of campaigns and promotions. Brands using digital loyalty programs get to secure relationships with their top customers and keep them around for the long haul. If done well, a digital loyalty program obliterates communication barriers between brands and customers.

Conclusion

USD 60,000 a week per store is no minor feat in China’s ultra competitive F&B industry. Both HEYTEA and Starbucks now face digital transformation challenges, but on different scales. Since HEYTEA is yet to establish itself as a mainstay in Chinese consumers’ lifestyles, it definitely stands to lose a lot more if it fails to adapt to the market – on home ground, no less. Global consumers want more innovation in menus and better use of technology. Chinese consumers require this and more – a convenient experience that is unique and worth talking about, especially on social media.

Until HEYTEA makes the pivot to increasing investments in CX – digital being the most feasible high-ROI option – it runs the risk of being just another fad in the vast tapestry of trends in modern, restless China.

Read more: Starbucks uses China as a testing ground for its new website

About the Authors

 

Naini Singh

Working primarily as a content creator in a multinational localization company in Beijing, Naini is also a digital analyst at 31Ten. She has lived and studied in India, China, and the United States, and writes on technology, culture, design, the internet, business, and marketing.

 

Clement Ledormeur

Clement is the digital project director at 31Ten. He is passionate about data analysis (qualitative and quantitative) and leveraging actionable insights to create effective digital experiences.

 

Editor: Joseph Leveque

Joseph is a partner and the head of digital strategy at 31Ten. He helps brands find the most efficient road online to reach ever more agile and informed Chinese consumers. Feel free to reach him at joseph@31ten.network if you have any questions regarding China’s Internet landscape, or if you simply enjoyed this piece and would like to talk more about it.

Author: Naini Singh