One Coffee Two Apps Three Transactions：How Shopee and Flash Coffee Fight in Two Arenas with One Drink?

This article is contributed by Zhao Tang, who is currently doing EMBA at Sasin Graduate Institute of Business Administration of Chulalongkorn University in Thailand

Getting a coffee in Bangkok is not a problem at all because there are so many options available, being renowned foreign coffee chains stores such as Starbucks and Tim Hortons, locally owned independent cafes, or small coffee trolleys on the sidewalks and in small alleys across the city.  

Competition in the Thai Coffee Scene

I’m not a coffee market research analyst. But as a heavy coffee drinker who has been living here for about two years, I found that, roughly, there are four price groups for a small-sized cup (about 8 oz) of hot black coffee:

• Super Low Price, normally using instant coffee powder, around 25 to 30 baht, usually seen at coffee trolleys on the street, and convenience stores such as 7-Eleven and FamilyMart;
• Low Price, brewed coffee, from 40 to 60 baht, usually seen at fast-food chains like McDonald’s, and small coffee stalls like G Coffee;
• Medium Price, freshly brewed coffee, from 65 baht to 85 baht, usually found at local cafés, such as Doi Tung and some café restaurants;
• High Price, fresh-brewed and sometimes with choices of beans, from 90 baht and above, found in established chains like Starbucks and The Coffee Club, and some boutique brands.

If we remove the Super Low Price group, brewed coffee, in general, is in three price groups – namely, Low, Medium, and High. 

Despite most well-known chain brands offer a small-sized Americano around 70 to 100 baht in their original prices, such as S&P Blue Cup (69 baht), True Coffee (75 baht), Tim Hortons (75 baht), and The Coffee Club (100 baht), many of which have regular Buy-One-Get-One promotions or points-for-cash discounts on various types of orders including walk-in, delivery and pickup. Practically, one customer could get a cup at or even below 50 baht.

As this price falls in the Low Price group, the price competition there has become much fiercer these days. 

A Flash Deal in the Coffee Scene? 

Flash Coffee, backed by the Germany-based tech incubator Rocket Internet, has announced 15 million USD in Series A funding in early April 2021 with a fast pace of expansion across the regional market. The chain officially entered Thailand in May 2020. As of mid-April 2021, there are some 30 outlets in Bangkok, according to the Thai website.

A hot Americano is set at 40 baht at Flash Coffee, apparently competing in the Low Price group here. As a newcomer, how to stand out from the overcrowded coffee market? 

Well, partnerships could help. Flash Coffee has chosen to partner with Shopee, part of the Singapore-based leading Internet conglomerate SEA Group which also seeks to grow its mobile wallet and payment business ShopeePay in Thailand.

Now, here is the deal from both of Flash Coffee and Shopee for coffee drinkers. 

The tech-enabled coffee chain sells cash vouchers of 39-baht face value at only 1 baht on the Shopee marketplace, which almost like a freebie. Customers can purchase and redeem them when paying with ShopeePay at Flash Coffee outlets. Therefore, effectively, customers can get a 40-baht Americano from Flash Coffee at only 2 baht. For the moment, each Shopee user can use one cash voucher per day. And, yes, so far, I’m not aware of any other major coffee brands that can match their price with similar offers – I mean 2 baht for a hot freshly brewed Americano. Sounds great? 

Who gets what?

When a customer gets a great deal of coffee, what benefits do Shopee and Flash Coffee get?

I guess it’s obvious when we look at Shopee. With each purchase, a customer like me contributed three transactions to Shopee. First, I need to buy a discount voucher at Shopee marketplace. Because of this purchase, there are two transactions made, one at the e-commerce platform the Shopee app and one for the payment at ShopeePay. Then, I need to scan the QR code at Flash Coffee stall for the coffee, making another transaction from ShopeePay. In other words, the transaction volume goes up, which usually is good for the performance metrics for Internet-based business. At least, this is from some investors’ perspective.  

In addition, for first-time users of Shopee, they need to download both Shopee marketplace and ShopeePay mobile apps. According to the Liftoff SE Asia App Engagement Report released last year, the CPI (cost per install) of one mobile app has already reached about 50 baht in Southeast Asia in 2019. And in the case of Shopee, 38 baht to acquire a customer for two apps (or 19 baht for each), that’s like a huge bargain these days in the competitive e-commerce and mobile wallet payment apps. 

Even if for existing Shopee users, the spending of the 38 baht could help to boost Shopee’s numbers of DAU and MAU (daily active users and monthly active users) of the two apps. 

Oh, last but not least, we shall not forget Shopee has legally obtained users’ data through the KYC process at ShopeePay and consumption habits. They can, again legally, use collected data for endless marketing and retargeting purposes. 

I’m sure Flash Coffee has also benefited from each purchase as well. Whenever a customer purchases a voucher for each coffee deal, their preferred location of the stall and basic customer details, have been passed through Shopee. 

But, if one day all campaigns are gone, will those coffee drinkers come back to Flash Coffee?