Starbucks Raises Prices, But Who Cares? 没人会在意星巴克提价

By newsdoug on February 1, 2012

Starbucks raises China prices If someone raises the price for an already ridiculously overpriced Gucci handbag, will shoppers really care? That’s the big question for Starbucks (Nasdaq: SBUX), which is tempting the lower-end luxury lifestyle market with its first price hike in 5 years, challenging China’s growing ranks of yuppies to pay 1-3 yuan more for their favorite cup of daily coffee. (English article) From a price perspective, this looks like a relatively modest hike, amounting to a 5-10 percent increase for coffee that already cost as much or more than a full meal at many local eateries. What’s more, Chinese consumers are already accustomed to price increases in this range, as inflation in 2011 hit some of the highest levels seen in years. But the real question is: will consumers even care when they are already so obviously spending money on a product that is really an extraneous low-end luxury good one of whose main functions is simply to let consumers show off their yuppie status? All of that said, my answer to the question is a definitive “no”, and I see little or no impact to Starbucks sales from this price increase. In fact, I could even see the opposite happening, with even more consumers flocking to Starbucks for coffee in order to show the world that higher prices won’t deter them from pursuing the yuppie lifestyle that Starbucks represents. Such consumers may also appreciate the fact that Starbucks waited for inflation to cool before making its move, unlike most companies that already raised their prices last year at the height of the inflationary cycle. I also like the way that Starbucks announced the move, informing its customers first on the popular Weibo microblogging platform in an attempt to ease the mild shock that some may soon feel on learning the price of their coffee has risen. What all of this says more broadly is that people will be willing to pay a premium for luxury goods in general regardless of mild price changes, as the value they get from such goods contains many intangible elements that can’t really be measured by the cost of the good to start with. All that said, Starbucks also realizes it’s not exactly a Gucci or Louis Vuitton, and has taken a prudent approach to its increase by keeping it modest, waiting until broader inflation is showing signs of cooling and being as transparent about it to consumers as possible.

Bottom line: Starbucks’ new price hike is unlikely to deter customers from buying its pricey coffee, and could even bring it more business from China’s growing ranks of yuppies.

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