QSRs can boost frequency, average size of orders via mobile apps
While mobile food ordering is still nascent, quick-service and fast-casual restaurant chains that have launched mobile applications with ordering capabilities have boosted the frequency and average size of customers’ orders.
Of the 22 percent of quick-service restaurants that have a mobile app, only 22.7 percent allowed for ordering, according to eMarketer, which found that fast casuals were ahead in this respect—58.3 percent of those chains with an app allowing ordering. Those figures, however, are on the verge of exploding.
“The growth of mobile food ordering is definitely tied to smartphone adoption,” said Krista Garcia, research analyst at eMarketer, New York. “For some time there have been text services like GoMobo—Subway and Panda Express are among those who use it—but these are pretty rudimentary.
“The newer apps and mobile sites just make ordering more user-friendly, since they resemble the interface a user might be accustomed to seeing on their computer, and most Internet users are comfortable with making purchases online,” she said.
“Mobile food ordering is still in its early stages so essentially any company that offers it now is ahead of the game.”
Snapfinger, SeamlessWeb and GrubHub are three of the bigger names in mobile food ordering aggregators.
As far as individual restaurants, all three big pizza chains—Pizza Hut, Domino’s and Papa John’s—as well as burrito chain Chipotle, were early-adopters of mobile food ordering.
Sonic started a mobile ordering test last month, and Five Guys Burgers and Fries offers ordering through a mobile Web site and via text messaging.
“This year we see more branded apps being released that go beyond games and loyalty programs,” Ms. Garcia said. “Adoption of mobile food ordering will proceed quickest in dining segments in which convenience is an important part of the experience.
“In other words, expect it to develop fastest in fast-food and quick-serve chains, with smaller, independent restaurants linking up with established aggregators like Snapfinger, SeamlessWeb and GrubHub,” she said.
“Mobile food ordering isn’t likely to surpass online ordering any time soon, but there is definitely interest in this channel.”
GrubHub’s mobile strategy is geared towards simplifying the connection between hungry consumers on the go and restaurants. Its focus is on Apple’s iPhone, Google’s Android and HTML5 mobile Web browsers, as well as the iPad and Android-based tablets (see story).
Various analysts are projecting that later this year smartphone ownership in the U.S. will surpass that of traditional feature phones for the first time.
SeamlessWeb claims that this transition happened long ago for its customers, who tend to be more affluent and tech-forward than the average U.S. consumer.
Thus, the company decided to launch a mobile Web site and applications for iPhone, Android and BlackBerry.
“It’s not a great leap to assume that customers who are tech-savvy enough to order delivery through a Web site are also likely to have smartphones,” said Ryan Scott, chief marketing officer of SeamlessWeb, New York.
SeamlessWeb claims to be the nation’s largest online and mobile food ordering service and that it is roughly four times the size of the nearest competitor based on 2010 revenue.
The company is projecting to bring in more than $400 million on an annualized run-rate basis this year,
SeamlessWeb estimates that 98 percent of its customers have a smartphone that they carry with them every day, including those who have company-provided devices.
As the number and range of applications available for smartphones continue to proliferate, consumers are learning that they can use their smartphones for more than just email and Facebook.
“Increasingly, customers who are not necessarily big ‘techies’ are exploring and discovering less-mainstream apps that they enjoy using,” Mr. Scott said. “If someone likes Epicurious’ app or Foodspotting, then it’s not all that surprising that they would be willing to try ordering food on their phone.
“In addition to this, the speed and ease of use of many mobile apps has in many cases begun to surpass that of regular Web sites,” he said. “Customers have their phones with them all the time, and from our data we increasingly see customers using their phones to order food in locations such as their office or apartment where they would traditionally have used a laptop to order from us.
“At the end of the day, it may just be more convenient for customers to place an order from their phone than to go into a different room, boot up their computer, wait for it to start, open a browser and go to our site.”
Food in particular seems to have a strong attraction for customers on mobile devices.
Mr. Scott said that the reasons for this are likely quite diverse, but it may come down to the fact that food is a personal, fun activity that one engages in for their own benefit or that of their friends and family.
The same way that people like checking into Facebook or foursquare on their free-time, for people who enjoy food, ordering or learning about food from their mobile device may be a relaxing, enjoyable way to spend a little time—a fun diversion of sorts. It is also probably a convenience play, per SeamlessWeb.
“As evidenced by the success of FreshDirect’s mobile ordering app, there is no doubt that time-starved consumers are looking for any way to save themselves time and energy, and a mobile food ordering and delivery app plays directly to that trend,” Mr. Scott said.
“As long as food is fun and people are short on time, mobile ordering is likely to be very much in demand,” he said.
From 0 percent of SeamlessWeb’s volume just eight months ago, mobile now represents more than 10 percent of its business on weekdays and 14 percent on weekends.
Average order size for SeamlessWeb’s mobile customers is very close to that of its PC Internet users, but mobile customers order more frequently.
Mobile orders for SeamlessWeb increased by 545 percent from the mobile app launch in July last year to February this year.
“Our growth in sales from mobile outstrips that of all other areas,” Mr. Scott said. “On average, our percent share of total revenue volume going through mobile apps has increased 1 percent in each of the last four months, and we fully expect that mobile ordering will surpass PC online ordering in the not-too-distant future.
“Based on current trends that would be in under three years’ time,” he said. “However, with the continued expansion of platforms and higher adoption rates of smartphones, we actually believe that our mobile sales have yet to hit an inflection point in the growth curve.
“In other words, it is entirely possible that mobile will represent more than 50 percent of our business in under two years’ time.”
By definition, take-out is dictated by a use case where convenience is the primary factor in the decision process, often even more important than price or type of food item.
“There is one common theme that is driving mobile ordering across all demographic markets—people’s lives are busier than ever and when eating accounts for at least 1,095 life events per year there is going to be conflict with far more pressing agendas,” said Jim Garrett, CEO of Snapfinger, Atlanta.
“Mobile devices provide real-time access for fast, convenient and easy access to restaurants that are relevant to today’s consumer,” he said.
Snapfinger has a mobile Web site and applications for iPhone and Android
Mr. Garrett said to think of mobile ordering as this generation’s drive-through.
“The drive-thru at the typical QSR accounts for 70 percent of their business, because oftentimes people have more pressing things to do with their time than enjoying an in-dining experience,” Mr. Garrett said. “An entire industry was created for people who are time-pressed but still need and want to eat.
“This trend was inevitable—it is just that restaurants were the last to adopt to the shift in consumer preferences that many industries adopted years ago,” he said. “It is almost as if the Internet has been re-invented.”
Three years ago mobile did not even make the top 10 list from Snapfinger customers in their development priorities.
“Thankfully we exercised our veto power and made it number one,” Mr. Garrett said. “Now our customers are thankful that they have all been first to market in their respective categories and their customers are finding their brands relevant to their lifestyles.”
The projected growth curve for mobile ordering for food pickup and delivery is all about customer awareness, per Snapfinger.
Mr. Garrett said that mobile ordering is much easier and faster and, most importantly, more relevant to where you are at the moment.
“There is no doubt that mobile ordering will surpass PC ordering—the question is which month of 2012,” Mr. Garrett said. “The real issue for restaurants is total access.
“You have to be relevant to your entire customer base regardless of time, place, device or demographic,” he said. “You have to be able to meet your customers where they are, not expect them to change their lifestyles to meet your requirements.
“That is why we are leaders in remote call center, Web, mobile, tablets and later this year the ultimate interactive device,” he said.