In 1992, Howard Schultz, who opened the first Starbucks store in Los Angeles, received a personal letter from Suzuki Rokusan, the founder of Japan’s fashion group Shazaby Alliance, inviting him to bring Starbucks to Japan. However, after analyzing and conducting research, Starbucks’ consulting company concluded that entering Japan might not be a wise decision. The representative of the investor in Japan’s fashion group, Tatsuo Umamoto, also doubted Starbucks’ positioning due to the market conditions in Japan at that time.
In the 1990s, coffee had saturated the Japanese market and entered a phase of decline. In 1981, Japan had 150,000 coffee shops, which decreased to just over 100,000 by 1991. Old-fashioned, high-priced pour-over coffee shops gradually disappeared in the market with intense competition. The winners of that era were high-quality, low-cost chain coffee shops, represented by Doutor, the counterpart of McDonald’s in China. Doutor rapidly expanded in major cities like Tokyo, offering high-quality, inexpensive coffee, priced as low as 180 yen (about 1.6 dollars). The main consumers were white-collar workers above 30, spending about 15 minutes in the shop, strategically located in high-traffic areas like train stations, serving as convenient refueling stations for essential consumers.
To maintain low-priced coffee, chain coffee shops like Doutor focused on optimizing store operations and promoting automation, standardization, and scaling. Under Doutor’s high-quality and high-turnover model, each store consumed a maximum of 2 tons of coffee beans per month, far exceeding the industry average of 20 kg to 50 kg. To control supply chain costs, Doutor established its coffee bean farm in Hawaii when reaching approximately 750 stores.
To further increase per customer transaction, value-for-money chain coffee shops like Doutor devoted efforts to developing desserts and meals. For example, Doutor’s flagship product was the sausage hot dog, priced at approximately 400 yen (3.6 dollars) when paired with coffee. Saint Marc Café did so by selling horn-shaped bread at about 120 yen (about 1.1 dollars). Combining high-value coffee with food/desserts became the standard strategy for most coffee shop chains in Japan.
Doutor’s first store
In a market where low-priced coffee dominated pricing, Starbucks’ prices were considered excessively high. Achieving Starbucks’ values (decoration, taste, and service) while keeping prices at the same level as Doutor was challenging, and Starbucks’ turnover rate was much lower than Doutor’s. Additionally, the Japanese were not used to taking away coffee, making it difficult to estimate the revenue model for a single store.
Based on these analyses, project leader Tatsuo Umamoto showed his pessimistic concern when he was in Starbucks headquarters. This made the then-executive director Howard Behar turn red, hurriedly explaining the operation of the store and the concept of the third place. “The atmosphere here, background music, high-quality products, the relationships between each staff and customer. These are all unique!”
Starbucks Ginza Store, Japan’s first store
Just as everyone hesitated on how to launch Starbucks in Japan, the founder of Shazaby Alliance, Rokusan Suzuki, bluntly stated while holding a Starbucks cup and looking at Umamoto, who was confused, “This cup and logo are extraordinary.” This statement suddenly reminded Tatsuo Umamoto of a Starbucks in downtown Seattle. At the entrance stood a green logo, and customers leaving the shop all held a cup with the logo, walking confidently on the sunlit street. Their posture was very stylish and cool, a lifestyle and scene he had never seen before. He suddenly realized that Starbucks carried not just coffee but everything behind the brand – the time, space, and air that people yearn for, which all evoked the imagination of consumers.
So, who were the consumers of Starbucks coffee in Japan? Conducting consumer surveys with his team, Tatsuo Umamoto interviewed individuals without mentioning Starbucks’ name but described the space of the store. Consumers were then asked to provide an acceptable price range based on their imagination of a coffee shop. They ultimately discovered that more than 60% of female consumers, as opposed to white-collar male consumers pursuing essential coffee, were willing to pay twice the price of Doutor for Starbucks coffee.
These women who were willing to pay a high price became the new generation of female white-collar workers in Japan. In 1985, Japan’s Equal Employment Opportunity Law for Men and Women was passed by the National Diet and officially implemented in 1986. The law guaranteed women the right to enter the workforce, leading to more white-collar women taking on executive roles within companies. Traditional Japanese coffee shops and Doutor coffee shops primarily attract male customers, with dark-colored interiors, smoking allowed, and coffee as the main product. With the advent of gender equality movements, women entering the workforce sought their own spaces.
To meet the needs of these demographics, Starbucks implemented a series of localized adjustments in Japan. In terms of interior space, Starbucks became the first coffee shop in Japan to implement a smoking ban. In terms of products, they strengthened offerings such as Matcha Frappuccino and seasonal limited-edition beverages. In retail, they expanded into a range of peripherals and began selling coffee beans. These strategies firmly grasped the female white-collar demographic as the core consumers. Young mothers also willingly come to Starbucks to relax and socialize, often pushing baby strollers. The mature and sophisticated decor of the stores also made Starbucks an attractive destination for high school girls.
As a “social prop,” Starbucks also attracts the younger generation of consumers. The prevalence of Western-style male and female baristas in Starbucks contributes to the perception of Starbucks as a fashionable and beautiful benchmark. Japanese university students are even willing to work at Starbucks. A Japanese retail expert mentioned, “White-collar workers strolling down the street with Starbucks cups had a significant impact on us. We realized that coffee could be enjoyed in this way.”
Starbucks successfully navigated the saturated market in Japan, capitalizing on the dividends brought about by changes in social structure. Through branding efforts, Starbucks gained the affection and trust of female consumers, overturning the industry trend that coffee must be sold at a low price and carving out its own niche.
Performance comparison of Starbucks and Doutor
