The Luckin saga continues as the Chinese coffee challenger looks for solutions to the undesirable consequences of a $ 310 million fraud. On Tuesday, the company announced the dismissal of Liu Jian, the alleged fraud innovator, and Qian Zhiya, a rare female leader of a Chinese Internet company. Despite the scandal, the company is reported to be expanding, opening ten stores a day in the second quarter.
Another recent effort by the coffee delivery startup is a reminder that the NASDAQ-traded company doesn̵
Luckin started advertising lifestyle goods in the third quarter of 2019 and has gradually expanded its range. These elements can be easily recognized in the app by tapping the “Trendy Items” icon (潮 品), which is located right next to the entry in the coffee menu. Luckin’s share of non-beverage products, including packaged snacks, increased from 14% of total sales to 23% between Q3 2018 and Q3 2019.
It may seem strange that a coffee chain sells hygienized towels and garbage bags, but the approach could point to a long-term strategy in internet business in China: rapid creation of a user base through a competitive product and later monetization through a peripheral but lucrative business.
Heavily subsidized coffee was Luckin’s engine for user acquisition. The lifestyle products are also currently offering considerable discounts. So the question is whether they include the company’s cash cow when the perks are gone. After all, why should consumers buy the bare essentials from a coffee ordering app when dozens of larger e-commerce outfits offer more choice and more sophisticated logistics management?
Luckin received an unexpected boost after his accounting fraud. With patriotic drinkers gathering around the local coffee brand and frugal consumers who wanted to redeem coupons quickly before a possible business breakdown, Luckin’s daily active users rose 12-fold to 4.4 million in early April, according to data, when the scandal came to light from third-party analytics firm Aurora Mobile. The growth was short-lived and the DAU has decreased and is currently below 1.5 million.