From Street-Side Cafés to Starbucks’ Reserved Seats: China’s Café Economics | Insights

Chongqing - Independent cafés and small shops line the winding steps of Daijiaxiang, a historic hillside neighborhood overlooking the Jialing River. Visitors can grab a coffee, enjoy the river views or simply take a break along the way. 

Spanish tourist Isabel, who stopped at a cat café, remarked: "Having a café, especially a cat café, in a place like this is such an interesting idea." The relaxed atmosphere is part of the neighborhood's charm.

At a nearby Totomato Coffee, a staff member even invited a delivery rider collecting an order to sit down and rest, adding to the neighborhood's relaxed, welcoming feel.

But several kilometers away, a different scene could be found at a Starbucks Reserve store in Chongqing's Raffles City shopping complex. A sign on one table read, "Reserved for Starbucks Customers." Next door, an outlet of Ah Ma Handmade, a popular tea brand from Guangxi, had also posted a notice asking customers to make a purchase to use its limited seating.

Weeks ago, Starbucks China introduced a nationwide purchase-before-seating policy, alongside its Third Place Initiative, which sets out guidelines for the use of seating and shared areas, noise levels and outside food. The company says staff should communicate the policy in a friendly manner and provide priority assistance to pregnant women, people with mobility difficulties and others with special needs.

The move has prompted questions about the economics of café space: as consumers gain more ways to buy coffee without sitting down, what role should the traditional coffeehouse play?

A changing equation for coffee retailers

According to the Chongqing municipal government, the city had more than 3,800 coffee shops. Yuzhong District, where Daijiaxiang is located, had around 700 specialty cafés, the highest concentration in the city.

At the same time, coffee purchases are becoming less dependent on physical stores. Mobile ordering, delivery, and pickup allow customers to buy drinks without using a café's seating or spending time inside.

Luckin Coffee's third-quarter results, released on November 3, illustrate this shift. The company reported revenue of 17.89 billion yuan (about 2.68 billion U.S. dollars), up 17% year on year, while average monthly transacting customers reached 123 million, a record high.

Its delivery expenses fell 38.1% to 1.79 billion yuan. Luckin attributed the decline primarily to a shift in its order mix from delivery to pickup in-store.

Starbucks faces a different set of pressures. In its fiscal second quarter, comparable sales in China increased 0.5%. Transactions rose 2.1%, while the average ticket declined 1.6%.

Gao Chengfei, deputy director of the Brand and IP Committee at the Influence Research Institute, said that rising customer traffic does not necessarily translate into higher spending. He argued that the expansion of the 9.9-yuan coffee price segment has weakened the premium that once helped support more generous seating arrangements.

Three models are emerging

Gao identifies three broad approaches to the coffee business: efficiency, experience and the certainty of having a seat.

The differences are visible in the operating models of Manner, M Stand and Starbucks.

Manner focuses on efficiency. Many of its outlets are compact, some occupying around 10 square meters, with customers collecting drinks at the counter rather than sitting inside. The model reduces the need for large retail spaces and is suited to office buildings and busy commercial locations.

M Stand takes a different approach, using distinctive interior design to make the store itself a destination. Its physical environment forms part of the reason customers choose to visit.

Starbucks has traditionally competed through a combination of coffee, service and seating. As Gao puts it, a key part of its offering is the assurance that customers can find a place to sit.

Gao argues that office-based coffee consumption is among the areas where the traditional third-place model faces the greatest pressure. Lower-priced takeaway options allow office workers to get coffee without leaving their workplace for an extended period.

The distinction also matters for Starbucks' operating structure in China.

On April 2, Starbucks completed its joint venture with Boyu Capital. Boyu holds a 60% stake in the China retail business, while Starbucks retains 40% and continues to own and license its brand and intellectual property. The venture covers approximately 8,000 stores, which are to transition from company-operated to licensed operations, with both parties sharing a long-term ambition to expand the network to as many as 20,000 locations.

Gao argues that the change makes store-level economics more important. Under the previous company-operated model, rent, staffing, and maintenance costs were managed within Starbucks' retail operations. As stores transition to a licensed model, those costs become more directly tied to individual store performance.

Yet Starbucks is also investing in the in-store experience. On October 21, the company announced plans to invest more than 300 million yuan in fiscal 2027 to upgrade services, equipment, and facilities at around 1,000 stores.

One rule, different markets

Whether the same seating policy can work equally well across China's diverse retail markets remains a question.

Zhu Danpeng, vice president of the Guangdong Food Safety Promotion Association, said that consumer habits vary considerably between major cities and smaller markets. Starbucks' network extends across more than 1,100 county-level markets, where customer traffic and willingness to pay for seating may differ significantly from those in major urban centers.

He noted that a uniform policy could therefore be difficult to implement consistently across all locations.

Wang Zhendong, chairman of Shanghai Feiyue Investment Management, has previously suggested that Starbucks should strengthen staff training and allow greater flexibility in how stores manage seating. Office-building and shopping mall outlets could designate certain areas for customers who have not made a purchase, while outdoor seating could be treated differently.

Such considerations are relevant in Chongqing.

In Daijiaxiang, the cafés are closely connected to the surrounding pedestrian environment. Visitors come not only for coffee but also for the mountain paths, historic streets, and river views. Outdoor chairs extend the café experience into the neighborhood.

At Raffles City, where customer traffic is concentrated within a major commercial complex and retail space is limited, seating has a different operational role. The similar notice at Ah Ma Handmade indicates that the issue extends beyond coffee brands.

Starbucks is also continuing to develop community-oriented store experiences. In July, it announced that its interest-based community spaces, developed in partnership with Xiaohongshu, would expand to nearly 2,400 stores nationwide. The program includes themes such as pets, crafts, cycling, running, reading and music.

Gao expects this segmentation to continue over the next two to three years. In his assessment, efficiency-focused stores will continue to minimize space and prioritize turnover, while experience-led cafés will increasingly treat their surroundings as part of the product. Large stores offering extensive seating without a clear commercial model, he believes, will face greater pressure.