Starbucks in Vietnam

I came across an interesting video by CNBC on Starbucks’ alleged struggle in Vietnam.

I agree with several points brought up in the video clip, but there isn’t much data to back up their thesis that Starbucks is struggling in Vietnam. The only corroborating data is a Starbucks store per capita. Apparently, the figure in Vietnam is much lower compared to that in our neighboring countries.

Nonetheless, there is no financial data that indicates Starbucks is struggling in our country. Moreover, Starbucks has been expanding slowly yet steadily in Vietnam.

To show that Starbucks is struggling, the video reported that the chain owns less than 3% of the market. Well, which market? If you’re talking about the market that involves every mom-and-pop shop in every province and everybody across all income brackets, then I am not surprised at the low market share. Coffee at street stalls is significantly cheaper than coffee at Starbucks and I doubt you can find the chain outside of the major cities such as Hanoi, Saigon or Danang. But Starbucks isn’t for everyone. To make the market share figure more relevant, it has to be for the upscale market. Compare Starbucks with Runam, the Workshop and stores in shopping malls, and see how the green brand fares. My experience with Starbucks in Saigon is that it never lacks traffic. It always seems popular to the citizens. The point is that the video lacks quantitative evidence to make the case.

There is one more example that I want to add regarding how Starbucks doesn’t really fit in the Vietnamese culture. We Vietnamese people like to go to coffee shops and spend hours there working or browsing the Internet. In Starbucks stores in Vietnam, you are given one Wifi code for each receipt and each code is good for two hours, I believe. Asking for one more code is possible, but if a customer forgets, it will be inconvenient for an average Vietnamese customer.

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Starbucks, monetary superpower. Let me give you a notable quote to get an idea of what this article is about

Starbucks has around $1.6 billion in stored value card liabilities outstanding. This represents the sum of all physical gift cards held in customer’s wallets as well as the digital value of electronic balances held in the Starbucks Mobile App.* It amounts to ~6% of all of the company’s liabilities. 

This is a pretty incredible number. Stored value card liabilities are the money that you, oh loyal Starbucks customer, use to buy coffee. What you might not realize is that these balances  simultaneously function as a loan to Starbucks. Starbucks doesn’t pay any interest on balances held in the Starbucks app or gift cards. You, the loyal customer, are providing the company with free debt. 

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