With China’s coronavirus epidemic slowing, people are getting back to work after the one-month quarantine at home. For many young workers who are used to ordering a cup of Luckin (LK: Nasdaq) coffee in the morning, they noticed a slight uptick in price.
Americano increased from CNY 21 to CNY 22 per cup. Latte inched up from CNY 27 to CNY 28 per cup, similar to all other products on its app page. Luckin responded to this price change on Tuesday that it was a regular operation adjustment, and as such the discount and coupons will be adjusted dynamically according to the market reaction.
Different from many merchants’ price increases that may cause customer dissatisfaction, Luckin seems skilled in this field. Right after the price increase, the company launched another round of ‘buy one get one free’ and ‘72% off’ promotion, which in some cases will be cheaper than before. After all, the price fluctuation of CNY 1 is too small to make a difference for most consumers.
Though Luckin raised its products’ price for the first time, similar approaches have taken place in several ways essentially. However, its data-driven pricing strategy is too smart that customers wouldn’t realize the difference and may simply take it for granted. Luckin customers have been immersing in the non-stop eye-popping discounts and promotions that even the intrinsic price increase won’t affect their feeling of zhanpianyi (Chinese slang for taking extra advantages).
Based on Retailers internal reference (零售老板内参) calculation, the intrinsic price of Luckin’s fresh-made drinks and other products are CNY 12 and CNY 13.3 as of the third quarter in 2019, an increase of 2.56% and 9.92% compared with the second quarter in the same year. In fact, from the graph, we discovered that the real price of Luckin’s products has been increasing since the fourth quarter of 2018, a period when the price of each product of Luckin is fixed. That is to say; the company has been increasing the price silently through ‘dynamic adjustment of discounts and coupons.’