You can’t download your dinner, but often, you can order and pay for it with your smartphone. Consumers are increasingly using connected devices to locate restaurants, make reservations, browse menus and nutrition information, order food for delivery or pickup, pay for meals, and instantly redeem rewards. And restaurant operators are using consumer-facing connected devices to keep in touch with customers, accept online and mobile orders and payments, increase sales and tips, and respond quickly to complaints.
It’s all part of a bigger trend. Bricks-and-mortar retailers understand that they must also compete online. Walmart, for example, recently reported that it has grown its online sales to $10 billion. What’s perhaps more surprising is that online merchants have come to the realization that if they are to continue growing, then they need physical presence. Amazon, for its part, is experimenting with lockers in supermarkets and small unmanned helicopters for same-day delivery.
In the future, nearly all retailers will employ a combination of online and physical techniques, because the combination enables marketing that is more continuous, interactive, and powerful. That type of approach though creates both opportunities and challenges for retailers’ IT departments. Fortunately, much can be learned by examining the best and worst examples of how restaurant chains are already using consumer-facing connected devices.
The Sweet Taste of Ka-Ching!
The success of connected technology in the restaurant market is demonstrated by the growth of online and mobile ordering, mobile payments, and online loadable plastic and electronic gift cards.
Online ordering is producing billions of dollars in business for chains including Pizza Hut, Domino’s, and Papa John’s. Mobile payments already account for a big portion of Starbuck’s revenue. In addition, a growing number of restaurant chains offer electronic gift cards and online management of plastic gift cards. And chains such as Chili’s and Applebee’s are deploying tablet computers to virtually all of their tables.
Pizza customers say that online ordering is faster and more reliable. Restaurants benefit from ordering automation because it means less time spent on the phone and fewer errors. Underscoring their commitment, the top three pizza chains continue to innovate: Papa John’s launched a Kindle Fire ordering app in 2012; Pizza Hut introduced an Xbox 360 ordering app in 2013; and Domino’s recently teamed up with Ford to develop voice-activated pizza ordering for vehicles equipped with the SYNC communications and entertainment system.
Today, online ordering accounts for about $12 billion in restaurants’ annual revenue. However, that’s a small fraction of the roughly $675 billion in U.S. restaurant total revenue. Online ordering for carryout and delivery is expected to more than double over the next few years as more restaurants make the switch.
The biggest growth is going to come in mobile payments. Today, restaurants are processing about $23 billion in mobile payments, but mostly in the form of gift cards that can be purchased and reloaded online. But who wants to carry around multiple gift cards, loyalty cards, and credit cards? Consumers will consolidate these functions in their smart devices as soon as someone develops a solution that is private, secure, easy to use, and universally accepted. Starbucks is leading the pack here, reporting that mobile payments now account for 10% of its transactions.
The Business of Being Social
Today, a good website is as essential to a restaurant as its cutlery. Yet restaurant websites are all over the map in terms of usability, information content, and overall quality. One key lesson is that restaurants should use responsive web designs that automatically adjust to devices with different size screens.
Social media is proving to be a powerful channel for interactive advertising and market research. Big chains such as Starbucks and McDonald’s have more than 30 million “likes” each on Facebook. But Applebee’s, with just 5.6 million “likes,” has generally done a better job keeping customers engaged. Most restaurant chains could use social media to drive sales with a little more planning and the right management tools.
Restaurant chains’ use of mobile apps leaves even more room for improvement. Many big chains don’t yet offer mobile apps. Others offer iPhone and Android apps that merely duplicate information and features found on their websites, and users complain that the apps either crash, don’t work properly, or lack important information. A bad mobile app is like a bad meal: Restaurant chains must do a better job designing mobile apps with unique features, testing them thoroughly, and retesting them to ensure that they work with new devices and OS versions.
Retailers by Order of Online Ratings
The twelve most popular restaurant-chain mobile apps, based on number of customer ratings in the iTunes and Google Play stores as of January 2014, were as follows:
1. Dominos 388,015
2. Pizza Hut 173,259
3. Starbucks 94,395
4. Chipotle Mexican 35,277
5. Papa John's Pizza 8,912
6. Hardee's 4,682
7. Dunkin Donuts 4,596
8. Culver's 2,127
9. TGI Friday's 2,091
10. In-N-Out Burger 1,959
11. 7-Eleven 1,878
12. Five Guys Burgers & Fries 1,865
A Side of Tablet, Please
The most disruptive innovation could be tableside tablets. Chili's and Applebee's are deploying tablets to all of their tables for ordering select items (appetizers, drink refills, and desserts), paying (without waiting for a restaurant employee to bring the check and pickup/return a credit card), and playing games (for a small fee). Pizza Hut is even testing an "interactive table" that behaves like a large tablet and can be used to order and to pay. These devices may take some getting used to, but once customers experience paying at the table they are unlikely to go back to the old method.
Consumer-facing connected technology has the potential to dramatically change retailing. It allows nationwide chains to act more like friendly neighborhood stores. It offers customers more secure ways to pay. And, it gives ordinary consumers new ways to tell retailers what they like and don’t like. Retailers that ignore these trends do so at their own risk.
Ira Brodsky is a researcher and consultant with 35 years of experience tracking emerging technology markets and defining new products. He is co-author, along with David Strom, of Datacomm Research Company’s new report, Good Food and Drink and Connected Technology, 2014-2019.