'Order Ahead' Catches On, Making Starbucks A Victim Of Its Own Success

Ordering ahead has been a wildly successful promotional concept. But it has created customer traffic problems.

The solution is a process, not just an event. Which means marketing has to coordinate with operations, finance et al in order to understand that if they dont want to lose customers, the answer is a system, not a silo. JL

Olga Kharif and Leslie Patton report in Bloomberg:

Order-ahead customers flooded stores, making it look like lines were extra long. Last quarter, mobile orders represented 20% of sales during peak traffic times at nearly 1,200 Starbucks.. Order-ahead apps drove 7% of all transactions, double a year earlier. (But) as walk-ins look at the number of people hovering, it “might create a signal to them that they are going to wait to do their transaction. Product, process and people have to be re-engineered to pull this off.”
For some time now, restaurant chains have been adding mobile order-ahead options, betting they’d be popular with their customers. But even they were caught off guard with just how big of a hit the technology is turning out to be.
TGI Friday’s Inc. mixed up orders, and Starbucks Corp. struggled with overcrowding that scared off regular walk-in-and-pay customers. And that’s likely just the beginning for a technology that’s only now really starting to catch on. Researcher Crone Consulting LLC estimates that in five years half of all sales at quick-service chains will be placed digitally before the customer ever steps on the premises. Today, less than 10 percent of the companies even offer the mobile order-ahead feature.
So swift is the growth of the technology that chains are having to rethink the way they do business, from putting a guy at the front door to greet customers to adding extra grab-and-go parking spaces. Pizza Hut Inc. is retooling its app to include order histories and suggest popular sizes to speed up the process. Fast-food chain Chick-fil-A Inc. already delivers orders curbside at about a third of its locations, and is studying whether to let customers grab their grub using drive-through lanes. Even mom-and-pop joints are jumping in: Eastman Egg Co., which runs three sandwich shops in Chicago and saw its monthly order-head sales rise 180 percent in December from a year earlier, is installing separate pick-up stations for mobile orders.

“Product, process and people have to be re-engineered to pull this off,” says Richard Crone, chief executive officer of the San Carlos, California-based consultancy. Order-ahead features can boost a store’s capacity by 30 percent, and if companies don’t get it right, “we could see a bunch of stores actually going out of business.”
Starbucks, an early pioneer of the technology, figured out the downside of not being prepared after it introduced the feature nationwide in late 2015. Order-ahead customers flooded some stores, making it look like lines were extra long. Last quarter, mobile orders represented at least 20 percent of sales during peak traffic times at nearly 1,200 Starbucks stores. A year ago, only 13 of the company’s coffeehouses could make that claim. Order-ahead apps drove 7 percent of all transactions last quarter, double the figure a year earlier. For some time now, restaurant chains have been adding mobile order-ahead options, betting they’d be popular with their customers. But even they were caught off guard with just how big of a hit the technology is turning out to be.

TGI Friday’s Inc. mixed up orders, and Starbucks Corp. struggled with overcrowding that scared off regular walk-in-and-pay customers. And that’s likely just the beginning for a technology that’s only now really starting to catch on. Researcher Crone Consulting LLC estimates that in five years half of all sales at quick-service chains will be placed digitally before the customer ever steps on the premises. Today, less than 10 percent of the companies even offer the mobile order-ahead feature.
So swift is the growth of the technology that chains are having to rethink the way they do business, from putting a guy at the front door to greet customers to adding extra grab-and-go parking spaces. Pizza Hut Inc. is retooling its app to include order histories and suggest popular sizes to speed up the process. Fast-food chain Chick-fil-A Inc. already delivers orders curbside at about a third of its locations, and is studying whether to let customers grab their grub using drive-through lanes. Even mom-and-pop joints are jumping in: Eastman Egg Co., which runs three sandwich shops in Chicago and saw its monthly order-head sales rise 180 percent in December from a year earlier, is installing separate pick-up stations for mobile orders.

“Product, process and people have to be re-engineered to pull this off,” says Richard Crone, chief executive officer of the San Carlos, California-based consultancy. Order-ahead features can boost a store’s capacity by 30 percent, and if companies don’t get it right, “we could see a bunch of stores actually going out of business.”
Starbucks, an early pioneer of the technology, figured out the downside of not being prepared after it introduced the feature nationwide in late 2015. Order-ahead customers flooded some stores, making it look like lines were extra long. Last quarter, mobile orders represented at least 20 percent of sales during peak traffic times at nearly 1,200 Starbucks stores. A year ago, only 13 of the company’s coffeehouses could make that claim. Order-ahead apps drove 7 percent of all transactions last quarter, double the figure a year earlier.
As walk-in customers look at the number of people hovering around the counter, it “might create a signal to them that they are going to wait to do their transaction,” Kevin Johnson, who will take over as Starbucks CEO in April, said on the company’s quarterly earnings call on Jan. 26. “We’re now laser-focused on fixing this problem,” outgoing CEO Howard Schultz added.
The coffee chain’s fixes include adding text-message notifications to alert customers when a mobile order is ready and hiring more baristas to smooth out congestion.
Adding headcount helped TGI Friday’s overcome its rocky start, too. After launching the feature in September, some restaurants angered customers by mixing up to-go orders and digital sales, which now account for about 7 percent of all orders. The casual-dining chain hired a person at each location whose sole job it is to manage those orders by personally shepherding the food from kitchen to host stand, said
Sherif Mityas, vice president of strategy and brand. The company is also experimenting with curbside delivery and may make over its parking lots to include two dedicated spots.

Moe’s Southwest Grill is testing a second burrito-making line in some stores. Workers there would just handle digital, catering and delivery orders. At Moe’s, digital orders are growing about 20 percent a year, said Bruce Schroder, president of the fast-casual chain.
“The guest wants convenience, they want quality and they want efficiency,” he said.
It’s a trend that’s likely to pick up momentum as more customers adopt the budding technology. Chipotle Mexican Grill said Monday it rolled out a new system to all its restaurants that offer digital ordering. The system allows customers to reserve future pick-up times, among other features, reducing wait times by as much as 50 percent in tests, the company said. “We remain focused on making it as easy and simple for customers as possible,” said Michael Lage, senior manager of the digital and mobile experience at Southern chicken-sandwich chain Chick-fil-A. “There are a lot of moving parts to make that happen.”