Beijing's First Starbucks Booted Out by High Rent

A rumor has started on Weibo that the first Starbucks to open on the Chinese mainland can no longer afford to pay rent. Influential finance blogger Jinrong Bagua Nu (金融八卦女) tweeted on her Weibo account this morning that the successful Guomao World Trade Center store, which opened in the late '90s, is not making enough profit to stay in the location. An increase in rent is forcing the branch to close or relocate.

For the past decade, the store has been jammed with wealthy white collar workers splurging to refill on sugar and caffeine. Starbucks' success in China surprised many, as until recently China had no coffee-drinking tradition, and there were initial doubts whether the Chinese would take to cappuccinos and lattes. But last year, riding on success, they raised drink prices by RMB 2, bringing the price of a tall latte up to RMB 27. In this year's second quarter, the company’s revenue in the region was USD 213.6 million, a 22 percent increase over the first quarter.

And the company continues to expand the scope of its offerings in China. A newly opened store in Beijing’s Oriental Plaza is testing a new model, serving freshly cooked dishes like beef lasagna and cream of mushroom soup.

So why can’t they afford to pay the rent? Either the property market in this city has gone from silly to insane or someone got the story wrong. This particular location is notorious for being crowded and seating limited. Slow turnaround on drink sales may be one of the factors affecting its ability to generate enough revenue.

The manager of the Guomao branch was not available for comment this morning and employees refused to make any statements. Still, users on Weibo have plenty to say.

Some netizens speculated if the closure is due to rent at all and said the branch was just moving. Most complained about the stupidly high rents businesses face in Beijing. An editor for retail web portal Linkshop.com, Zhu Zhenjia, warned more and more stores will be forced to move or close as more leases are beginning to expire.

Two months ago, Beijing’s second oldest McDonald’s branch was also forced to close, leading to an outpouring of emotion from netizens. And the city’s housing bubble has hurt us all at one point or another with apartment rental prices going up by 150 percent in the past decade.

Photo: Starbucks.com