2 days ago
China's Luckin Coffee is the anti-Starbucks. Will it work in the U.S.?
China's biggest coffee chain just opened stores in the U.S. for the first time. Its business model is the antithesis of Starbucks 's 'back to basics' plan.
Luckin Coffee has dominated the java-slinging business in its home country, where it overtook Starbucks as the largest coffee chain both by total sales and number of locations back in 2023. Now it's setting its sights on the U.S., with its first retail stores officially open in New York City.
Luckin's rapid growth is a product of what it calls its 'technology-driven retail model.' At most locations, the company operates without any cashiers, instead taking orders entirely through its popular mobile app—a strategy that prioritizes convenience and speed above all else. It's a structure that's almost the direct opposite of the new business model at Starbucks under CEO Brian Niccol, which emphasizes human interaction and personalized touches as a core part of the coffee-drinking experience.
What is Luckin Coffee?
For American consumers, Luckin's offerings are perhaps most comparable to those of Dutch Bros., covering a wide range of beverages, from specialty lattes and teas to refreshers, matcha, and a series of fruity Americanos. The prices are typically about 30% less than a Starbucks alternative. In a highly saturated American beverage market that's constantly vying to identify the next Gen Z drink craze, Luckin's menu isn't exactly reinventing the wheel. However, its business model does represent a coffee shop experience that no American brand has yet to fully emulate.
According to an analysis by the University of Pennsylvania's Wharton School, Luckin Coffee's founder, Jenny Qian, pulled inspiration for the shop's retail model from popular ride-hailing services. Virtually all the company's transactions are cashless, given that the entire ordering and payment process is handled through the brand's app—similar to the way one might order an Uber or Lyft.
While American brands like Dunkin', Dutch Bros., and Starbucks all have their own apps and mobile-ordering functions, none has made the plunge into a fully mobile-first strategy.
'We advocate a more convenient and rapid 'new retail' experience,' Luckin's website reads. 'Users can purchase, pick up and take out coffee through our mobile app, completely changing the traditional coffee business mode[l].'
Luckin's simplified sales approach lent itself to an astronomical pace of growth. From January 2018 to March 2019, Wharton's analysis notes, Qian and her team opened an average of 5.2 stores per day.
The brand's success was significant enough that in May 2019 Luckin made its first play at a U.S. presence by filing for an initial public offering. Just a year later, though, a U.S. Securities and Exchange Commission investigation revealed that the company's earning reports had been artificially inflated, causing Luckin to delist from the Nasdaq and fire Qian and six other executives involved in the scheme. In 2021, the company also filed for bankruptcy to recover from the $180 million in fines accrued during the legal proceedings.
Six years later, Luckin's new leadership team has pulled off an impressive financial turnaround. Per Luckin's first-quarter 2025 financial report, the brand now boasts more than 24,000 locations, primarily across China, Malaysia, and Singapore (Starbucks operates roughly 40,000 locations globally and about 8,000 in China). Luckin also notched $1.2 billion in net revenue during the three months ending on March 31—a 41.2% year-over-year increase. Meanwhile, Starbucks's sales in the region have stalled, with same-store sales down 8% in fiscal year 2024.
Due to New York's prohibition on cashless businesses, it's likely that Luckin's first two stores are operating under some combination of app and in-person orders. The brand did not immediately respond to Fast Company 's request for clarification on the stores' operations, or whether Luckin plans to expand its mobile app model to other states in the U.S.
At the same time that Luckin is perfecting its efficiency-first, in-and-out structure, Starbucks is working on backtracking to its former glory as a human-centric third place.
Since Niccol took the helm at Starbucks back in September 2024, he's been working to address the brand's image problems—a result of higher costs, longer wait times, and waning sales—with a plan he calls 'Back to Starbucks.' In an interview with Fast Company earlier this year, Niccol shared that he believed Starbucks had veered off course as a business during the mobile-ordering era of the pandemic. 'I think it just really took a lot of the soul out of what this business is all about,' Niccol said.
To recapture Starbuck's original 'magic' as a sit-down coffeehouse, Niccol has been working on bringing back human touches like handwritten notes, warm, familiar ads, and a simplified menu that emphasizes coffee quality over beverage trend-chasing. So far, it's clear that the turnaround won't happen overnight: In April, Starbucks reported financial results that even Niccol called 'disappointing,' with revenue and same-store sales falling below investor predictions.
While Starbucks de-emphasizes its mobile-ordering features, Luckin's entire business model revolves around them. Even the two companies' branding seems to underscore their opposing strategies: Starbucks embraces a warm aesthetic through its iconic dark green siren logo and color-graded advertising, while Luckin's bright blue branding and stag logo feel more reminiscent of a tech company or bank than a coffee shop.
Luckin's entrance into the American market is poised to offer a case study in whether Niccol's thesis around the importance of the coffee shop as third place holds true. Or perhaps what consumers really care about is how quickly they can pick up their iced matcha.
