Lessons in Retail Ecommerce Implementations From QSR

Source: Kevin Holmsten, Thursday, Aug 3, 2017

As retail looks to keep pace with consumer expectations, Quick Service Restaurants (QSRs) are leading the way in developing digital capabilities that meet their demands for greater speed and convenience. The sector is at the forefront of emerging personalization, on-demand fulfilment, and mobile payment best practices.

Implementing the next technology for digital personalization

Domino’s Pizza Enterprises is continuously adding new functionality to its online ordering system to improve convenience and personalization for the customers it serves in Australia, Japan and across Europe. Initiatives such as ‘Zero Click Ordering’ and its Live Pizza Tracker integration to the Apple Watch were credited as driving same-store digital sales growth of 10.9% in FY16.

The international pizza retailer allows orders to be personalized via digital channels, fulfilling basic needs of speed and convenience, while delighting customers as they select from a variety of sauces and toppings. Domino’s has a comparatively less complex operation to manage than grocery or apparel retailers due to its limited and flexible menu. With a smaller set of products and ingredients it is easier for Domino’s to maintain stable inventory levels to fulfil orders at a given location.

The success of its digital initiatives suggests that, as long they do not detract from current levels of service, customers are happy for Domino’s to develop and test a variety of initiatives. Its pizza tracker was introduced in 2008 as an entertaining way to take the mystery out of waiting for delivery. As the tracker gained popularity with consumers the tool continued to be updated with the latest technology. It helps consumers foster a personal connection to the retailer and individuals cooking and delivering their pizzas. As it develops and tests each initiative, Domino’s is comfortable that it could lead to either a gimmicky promotion, or new core piece of its digital strategy in the future.

RECOMMENDATIONS
Domino’s has created a culture of innovation, centred on a dedicated physical space at its headquarters, which is designed drives its growth in digital sales. This culture and commitment could be successfully applied across retail channels.
Compared to other retail sectors, in QSR it is easier to offer consumers the ability to personalize specific products in their orders. Suppliers can position themselves as valued partners by developing products that enable a faster, more cost-effective order personalization process at the point of purchase. 


Meeting the market need for on-demand delivery 

QSRs are innovating by increasing investments in delivery fulfilment. Hiring staff to deliver online orders, or partnering with foodservice aggregators that process orders and operate the delivery service are just two tactics. McDonald’s is expanding its partnership with UberEats to bring 3,500 US restaurants, and dozens of UK outlets on to the delivery platform. Panera intends to hire 10,000 employees for its delivery service for digital orders, for example.

In the QSR sector speed of service has long been a commodity, where on-demand delivery can help to add differentiation. Across other sectors, retailers need to respond to likes of Amazon, as it redefines fast delivery from two days to two hours with Prime Now.

RECOMMENDATIONS
To compete with Amazon, retailers should look to offer fast, low-cost delivery options by partnering with fulfilment aggregators that are expanding to channels outside of foodservice. 
Suppliers and partners can collaborate to speed fulfilment across sectors and promote products designed or tailored for on-demand delivery. They can, for example, develop packaging for product eaches that can be handled more efficiently in the supply chain. 


Opening new partnerships for the future of payment 

Starbucks’ mobile payment app is successful because it is easy for consumers to connect at any of the several phases in the ordering process. The coffee shop giant considers its app, strategically, to be a digital flywheel: each phase in its process of development adds power to the next. 

Starbucks drives repeat app usage and traffic by stringing together each of the phases: online order personalization, order processing, payment, fulfilment, loyalty tracking and digital marketing. Its digital marketing capability then loops the consumer back by incentivizing them to place another online order. On its 3Q17 earnings call, Starbucks reported that mobile payment made up 30% of its transactions in the US.

As mobile order & pay features offered by QSRs become more familiar and convenient, consumers will become more comfortable with similar functionality also being embedded into favourite retailers’ apps to buy impulse purchases as quickly as they would order a coffee on a break.

In China, Starbucks is collaborating with WeChat to process in-store payments using Quick Response (QR) codes via WeChat Pay. This collaboration benefits both brands. QR codes are a preferred payment method in China driven by the popularity of WeChat Pay, and Starbucks can conveniently serve its customers by partnering with the market leader. For WeChat, partnering with an international leader in mobile ordering presents an opportunity to grow its presence in other markets.

RECOMMENDATIONS
Retailers should benchmark their mobile ordering and payment apps against the Starbucks mobile ecosystem, as its new initiatives relegate existing in-app functionality as table stakes in the space.
Payment and e-commerce vendors can reach a greater share of consumers, and secure this share moving forward, by identifying and partnering with retailers that are committed to investing in and incentivising mobile as a key payment method.


Potential Use Case: Translating Digital Personalization

One way more complex retail businesses could apply the learnings from the digitization of QSR customer service would enable grocers to add mobile order personalization to meal kits. 

Theoretically, an app function could display available meal kit options to the on-the-go shopper, who could then select a preferred combination much as they would toppings on a pizza. The order could then be assembled for collection within a given, short-term time frame, ensuring optimum freshness and faster but flexible fulfilment.

Finding ways to mitigate the costs and complexity of enabling rapid product personalization would not only provide a new revenue stream but also significant differentiation and a first-mover advantage. Monitoring accurate inventory levels in real time to improve meal kit option availability and improve turnover on fresh ingredients are just two examples. As grocery retailers connect inventory monitoring to online click & collect orders, addressing existing inventory monitoring challenges unique to meal kits would be essential to make this work.