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Shake Shack Looks To Digital For Growth


 

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After reading an article from The Wall Street Journal, RDA’s CEO Tom Cole says - Chicken or the Egg? I’m not sure if anyone knows which came first – Customer Behaviors or Digital Transformation. This article is a perfect example of a business that used digital tools to grow their revenue while also driving in cost efficiencies. By allowing your customers to research, decide, and buy on a platform that benefits them translates to larger sales, more repeat sales, and better margins.”


Shake Shack Inc. is expanding a mobile-ordering app that’s helping to get more burgers, fries and shakes out the door, as the New York chain looks to digital technology for growth, the company said.

Since it was launched in March for iOS devices only, the so-called “Shack App” has increased both foot traffic and average order sizes, essentially by letting diners “cut the line,” Phil Crawford, the company’s vice president of information technology, told CIO Journal.

Because the chain’s meals are made to order, waiting times and lineups tend to be longer than at traditional fast-food restaurants.

Mobile orders from the app are processed over a digital ordering platform that calculates prep times and order size, to prevent kitchen staff from being overwhelmed, and ensures everything is ready for pickup within 15 minutes of placing an order, Mr. Crawford said.

Over the past four months alone, the iOS version of the app has been downloaded more than 200,000 times, with mobile orders accounting for 3% of total sales, according to company data.

That’s helped soften the blow from weaker foot traffic. Shake Shack saw a 2.5% decline in same-store sales in the first quarter, prompting the company to revise its 2017 comparable sales outlook downward.

Based on the success of the app, along with growing customer demand for shorter wait times, the company this week is set to release an Android version, which is expected to be available on Monday.

McDonald’s Corp. and Starbucks Corp. have both launched similar apps, creating new challenges for competitors, restaurant industry analysts say.

“It’s easy to let people order, but it’s harder to provide the food,” said Sharon Zackfia, consumer group head at William Blair & Co. LLC. “It’s not just about mobile payment, but how the kitchen keeps up with the demand,” she said.

Shake Shack’s challenge is to engage new customers with the app, but make sure they still get the same unique experience of coming into the store, said Nicole Miller Regan, a managing director and senior research analyst at Piper Jaffray & Co.

“It’s easier to systemize everything, but that’s exactly what this brand is not,” she said.

Noah Glass, founder and chief executive of Olo, a provider of e-commerce engines for restaurants which developed the ordering platform for Shake Shack’s app, said they worked closely with the chain to ensure users are able to choose an available pickup time, with prep times factored in so that cooked-to-order meals are timed to their arrival.

“It’s a really smart way to increase the average ticket,” Mr. Glass said about the app, adding that “you can make it even smarter in a digital experience than inside a restaurant, because you’re using data and doing it programmatically every single time.”

Indeed, mobile orders via the app are on average 15% larger than orders placed at the counter, the company said.

“There’s less pressure to order via an app,” said Mr. Crawford. “You’re not feeling you’re under the gun like when you’re in line” at a busy restaurant counter, he added. The app has also proven to be a popular tool for group orders, he said.

Digital ordering has allowed the chain to build in tailor-made upselling options for individual orders – the same way Amazon.com offers suggested products based on past purchases, Mr. Glass said.

For Tara Comonte, Shake Shack’s chief financial officer, the app is one piece of a broader technology push, which includes digital tools aimed at improving back-end systems, like inventory, invoicing and other internal processes, she said.

But customer experience is still the most important element, she said.

 

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