The dead simple strategy behind Chipotle’s $1.3B second life – Info Web Design

Chipotle–the burrito darling that lost its sheen after weathering a series of food safety scares–seems to be back on track. Its latest quarterly earnings beat all expectations, with an 8% increase in revenue to $1.3 billion, for which it has four things to thank: raising its prices, cheaper avocados (sweet, green profit margins!), a maturing delivery business, and a digital app that is growing at a phenomenal rate.

The latter is particularly notable because, until recently, Chipotle had a very limited digital strategy. In 2017, the company invested in a revamped app, and began building a new digital backend into its stores. That strategy is paying off faster than any analyst could have imagined–even though some of us might consider “the app” to be an anachronistic panacea for business woes in the modern era, a fix from the year 2010.

Chipotle’s digital sales grew 33% in the last single quarter after growing 20% the quarter before. That puts Chipotle’s digital sales at half a billion dollars, or about 10% of all Chipotle sales. Four million people are using Chipotle’s app and website each month, up 65% from a year ago. The app is resonating particularly well with millennials and Generation Z, the company reports. Once a younger person orders a burrito through the app, they likely will do so again.

The app itself is wonderfully streamlined. You choose delivery or pickup. And then you simply tap your way through photos of menu items and toppings to customize your order. You can even swipe right if you want extra carnitas or sofritas. After that, you choose the time you’d like to eat (it can be in a few minutes, or hours later). And you pay. It’s incredibly fast.

Talking to Curt Garner, chief digital and information officer at Chipotle, after last week’s quarterly earnings call, he readily admits that Chipotle has barely even embarked on its digital strategy. Crucially, the company hasn’t introduced rewards inside the app to incentivize customers to use it, which is standard at basically every food chain other than Chipotle.  “More important than the numbers, we’re just pleased that we’re starting to seeing some momentum,” says Gardner. “Certainly, we’ve got this great opportunity as a company to be more culturally relevant, and engaging.”

Chipotle has been playing catch up. For the past decade, Chipotle cultivated a local, organic narrative, and the friendly, face-to-face experience of buying a burrito in line. Companies like Starbucks and Domino’s, meanwhile, built incredibly sophisticated digital backends, which enabled simple apps, loaded with rewards, to make fulfilling that latte or pizza craving as rapid as possible.

Today, a third of all Starbucks payments in the U.S. take place through the app, and 13% of all orders are placed in it. For Domino’s, 60% of all orders come through its apps and website. For each of these companies, apps aren’t ancillary to their business. They’re intrinsic.

Chipotle has had an app since 2009. It even added a one-touch-order “burrito button” to the Apple Watch in 2015. But Garner admits that the app never really worked very well, because the front end interface wasn’t supported by backend operations. Only recently has the company introduced a second, behind-the-scenes make line, loaded with computer monitors. This update gets your order made faster, and with nearly perfect accuracy.

Now, the company is announcing another incentive to digital orders. It will make pickups even faster than before. An extremely limited pilot program, which placed digital orders on grab-and-go shelving, will be expanded to over 100 stores by year-end. This simple piece of furniture will allow you to skip the line. You’ll place and order on your phone, walk into a Chipotle, take your order right off a shelf, and walk out.

Time will tell if Chipotle’s digital growth trajectory can be sustained, and if it can continually meet the expectations of Wall Street, let alone customers, now that it’s achieved some early success. But for now, it seems that the takeaway is this: Chipotle, Starbucks, and Domino’s are food companies, not standing-in-line companies, or take-two-minutes-to-explain-your-order-to-someone companies. And the less painful it is to acquire their products, the more likely we are to scarf and slurp them down.