The “Mobile Order-Ahead” Gold Rush

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What were the last few apps you downloaded?

Chances are they had something to do with food; delivery, freebies, ordering ahead, or reviews. As mobile has rocketed to the forefront of commerce, it has proven to serve as an additive function within the ecommerce space.

Since its infancy, the web has offered a new platform on which businesses can expand their operations. Electronic commerce is defined as “a type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet (1).” Such transactions can be between businesses (B2B), businesses and consumers, (B2C), consumers (C2C), and consumer to business (C2B). Relevant sales volume has trended upwards since 2006 and has yet to slow down. As a percentage of retail sales, ecommerce sales accounted for 7.4% in 2015 and are projected to grow to 12.8% by 2019 (3).

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B2C ecommerce volume in billion U.S. dollars (thru 2013)

The significant growth in ecommerce can’t be mentioned without the recognition of mobile commerce’s (mcommerce) role. Mcommerce is defined as “the use of wireless handheld devices such as cellular phones and laptops to conduct commercial transactions online” (4).

More specifically, mcommerce has taken root in our daily lives whether realized or not. Why though? Companies have invested massive amounts of money into their mobile apps in the last few years not only for the wealth of data but the additive effect on customer orders. Of the industry leaders including Starbucks and Dunkin’ Donuts, Taco Bell has directly recognized 30% higher average order values via its mobile app than in-store. With over $9B in sales at Taco Bell in 2015, the opportunity for sales growth is tremendous when utilizing a mobile app.

Throughout this semester in #ISYS6621, we’ve mentioned the effects of mobile every single class. Snapchat, Facebook, Instagram – all of the advertising that comes with such apps; it is all in hopes of getting more customer dollars to businesses via the mobile phones that almost every one of us keep on our person throughout the day.

The benefits of a quality mobile-app provided by today’s fast casual restaurants such as Sweet Green are shared by both companies and consumers alike. With fast casual dining locations becoming ever more the rage – lines can be out the door.

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The demand for a healthy lunch via Sweet Green = line agony

This is where mobile-order ahead finds its allure. Customers can plan ahead while companies can boost sales and retain data within house to further innovate and locate new efficiencies.

Apart from fast-casual entities, QSRs (quick-service-restaurants) are also seeing major benefits to investments in mobile platforms. QSRs include what most consider “fast-food restaurants;” smaller transaction sizes, yet a much higher sales volume.

Starbucks and Dunkin’ recently released brand new rewards apps in the early weeks of this month. Starbucks dominated the transition to mcommerce when it first created its rewards app in-house, investing a great deal of capital, and making it a priority. As of last September, all 7,400 stores were capable of mobile-orders and the company reported over 8M mobile transactions per month as of this April (5). Dunkin’ severely lagged in the app space with its clunky, low-quality Dunkin’ Rewards app. The dominant reason for such a belabored entry into the rewards space is that Dunkin’ Donuts relies almost entirely on franchisees. While it is one of the company’s strengths, it was also its weakness in getting franchise owners to recognize the benefits to THEM (vs. the company) of partaking in the rewards program. Starbucks on the other hand does not utilize franchising, whatsoever, and was able to push its rewards program quickly and without the same resistance.

Almost a third of the way into the 2016 fiscal year, be on the look out for even more apps targeted at mobile-order ahead functions. While you as a customer see a benefit, so do the companies providing these new perks. The next time you order food via a mobile-app, be cognizant of that subconscious 30% increase in order size!

 

  1. http://www.investopedia.com/terms/e/ecommerce.asp
  2. Statista Graph: http://www.statista.com/statistics/239372/us-b2c-e-commerce-volume-since-2006/
  3. http://www.statista.com/statistics/534123/e-commerce-share-of-retail-sales-worldwide/
  4. http://www.investopedia.com/terms/m/mobile-commerce.asp
  5. http://www.geekwire.com/2016/starbucks-mobile-order-ahead-usage-doubles-last-year-now-8m-transactions-per-month/

7 comments

  1. I like how you opened up, ironically my last two apps I downloaded were delivery and freebie. I like how you brought what e-commerce was and identified that mobile is really taking off. That made me think about the the presentation we had in class where we found out most purchasing was being done on the mobile platform. I can personally attest that I hate waiting in lines, and if I have an app where I can order ahead, you better believe I am going to do that. Also, I find myself going to places that offer rewards more than others. I was thinking about why, and it is pretty much free money. If I am going to buy a cup of coffee, I would rather go to Dunkin to get rewards than Pete’s and not get any rewards. I really enjoyed reading you post and think there is a lot of potential in the e-commerce market. It will be really interesting to see how it moves in the future. Great job!

  2. ajsalcetti · ·

    I can attest that many of my most recent app downloads were food and delivery based apps! Drizly, Doordash, and Boloco just to name a few. I am also addicted to Boloco and their app, more so than I would be purely because of the technology element. Their app allows you to pay via LevelUp, so I don’t even have to use credit card or cash at that moment of purchase like I would at other “fast food” restaurants. The ability to order ahead, walk in and pay by pointing a phone at a box, and by pass lines and pay at the end of the month all sound pretty enticing to me. As we have discussed, there is a proliferation of app tech companies that are finding niche areas – whether they are able to endure in the long run and be profitable remains to be seen, but there is certainly a push by firms and a demand by consumers for on-demand food service.

  3. Ever since I upgraded my iPhone to one with more storage, I now have space to download many mcommerce apps that are so convenient to use. I am a big fan of Starbucks’ app because I usually get a lot of gift cards as gifts and can upload them to my account rather than carrying them around with me. In my Operations Management course, my group project is to analyze Sweetgreen’s business process and find its strengths and weaknesses. To gather data and research, we interviewed the manager of the store who said that the online order ahead option mitigates line length, which is one of the greatest limiting factors on business. People often refuse to wait when the line is long and will head elsewhere. In our society, we don’t like to wait for much and technology is a contributor to why we are used to instant gratification. I found it interesting that these mobile order ahead apps are not only convenient for customers, but also help increase sales since those who are more impatient will purchase since they don’t have to wait in line.

    I expect that mcommerce is only going to continue to grow as mobile becomes more and more significant for users. I tweeted an article yesterday (https://twitter.com/ldalessandro8/status/726882699563118592) that gives reasons for why mobile is so important for companies to leverage.

  4. I remember three years ago when Shake Shack opened up around the Chestnut Hill Mall a few friends and I decided to go… and waited in line for over an hour. There’s definitely a rise in waiting times for QSR restaurants like Sweetgreen and the like, and let me tell you — In N Out is no exception (impatient Californian here). Beside their functionality, it’s really interesting that these order-ahead apps increase the size of the average ticket by 30%! Trying to come up with reasons for the increase is hard but I would imagine it has something to do with the economic value of time. Maybe if people don’t have to wait in line they subconsciously consider the time saved to be extra spending capital. Or maybe people on apps have less self control similar to how online shopping can be addicting and gets people to spend lots of money. Cool regardless.

  5. You should look up the company Olo. They are doing interesting things in this space.

  6. This post is so true, I think me and my friends order in so much and we spend way more money than usual when ordering in because our eyes are way bigger than our stomachs. Factor in the added wait time on your already-starving stomach and our delivery total doubles. I think this is such an interesting topic that not too many people discuss, but it is such a profitable business model. However, I do feel bad for delivery personnel that run into traffic, hungry college kids are not fun to deal with.

  7. Very interesting topic. I’m more likely to order ahead at chains and other restaurants that I know have a good mobile presence. Last time I tried to order ahead from El Pelon; however, it was a nightmare and took 45 minutes to get my order. The market is there though, and more companies need to jump on board.

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