Mobile order-ahead apps are finding success in the US (SBUX)

digital-continues-to-drive-starbucks-sales-2016-4

This story was delivered to BI Intelligence Apps and Platforms Briefing subscribers. To learn more and subscribe, please click here.

Quick Service Restaurant (QSR) apps, such as Starbucks and Chick-fil-A, dominated the food service app category for downloads in the US during the first half of 2016, according to App Annie.

On average, app downloads in this category grew at an average annualized rate of 35% between the first half of 2014 and the first half of 2016. This growth indicates that brands are recognizing the importance of engaging with consumers beyond the in-store experience.  

There are three key features that successful QSR apps share, according to the report:

• They don't take customers for granted. Brands that bombard customers with emails, or have apps that take up too much data and battery power, run the risk of negatively impacting consumers’ attitudes. Instead, brands should use the opportunity to reward users with loyalty programs, offers, and promotions.
• Seamlessly manage the interaction between the digital and physical. Businesses need to ensure that their apps seamlessly integrate with the in-store experience. For example, the order-ahead process should reduce the friction of visiting an in-store location.
• Remain focused on innovation. The best-in-class QSR apps, according to App Annie, treat being on customers’ devices as a privilege and continuously focus on improvement. This includes customizing the menu and adding new features such as in-app payments and QR code reading. 

Enhancing the customer journey is key to hosting a successful QSR app. The addition of loyalty programs, mobile order-ahead, and favorite orders not only improve app engagement and spending for properties that use these features, but negatively impact competitors that do not provide them.

A separate study from app engagement platform Applause found that companies received negative reviews from consumers for not including features that their competitors used. This indicates that consumers are highly aware of cutting-edge industry features and that restaurant apps need to remain innovative to compete successfully in this space. 

Quick-service restaurants (QSRs) — also known as fast-casual restaurants — such as Starbucks have been turning to mobile order-ahead apps to extract higher sales, intensify customer loyalty, and heighten foot traffic.

Mobile order-ahead refers to a consumer-facing mobile payment platform that allows customers to order food remotely, pay for the items on their phone, and pick up their order at a specific restaurant location.

Leading QSRs in the U.S. are beginning to adopt these platforms at an accelerated pace and are benefiting from them. Taco Bell sees 30% higher average order values on mobile compared to in-store, and Starbucks' Mobile Order & Pay already represents 10% of total transactions at high-volume stores, directly contributing to increased company sales.

Mobile order-ahead is still in its early days, but will be a $38 billion industry by 2020, accounting for 10.7% of total QSR industry sales. This will be driven by full adoption among the top QSRs in the US, the growth of mobile commerce, QSR adoption through aggregators like Grubhub, loyalty programs, higher average order values, and new buy buttons.

Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed Mobile Order-Ahead Report that profiles the companies that have proved the mobile order-ahead concept and analyzes the trends contributing to this new industry's growth.

Here are some key takeaways from the report:

• Mobile order-ahead apps — platforms that enable consumers to remotely purchase menu items for in-store restaurant pickup — are on the rise among quick-service restaurants (QSRs). We expect sales on these platforms to reach $38 billion by 2020, representing a five-year compound annual growth rate (CAGR) of 57%.
• Mobile order-ahead will ultimately have an additive effect on the QSR industry. Mobile ordering platforms have been proven to intensify customer loyalty, increase purchase frequency, and lift average ticket sizes through order customization and easier checkout options. This means that mobile ordering is not a simple substitution for in-store purchasing, but a channel that can enhance the lifetime value of QSR customers. This makes mobile order-ahead a critical channel contributing to the growth of the QSR industry.
• Alternative commerce solutions will help propel mobile ordering. Aggregators like Grubhub will onboard smaller fast-casual restaurants into the mobile ecosystem by offering them an existing app to integrate into, lowering the upfront costs of creating a mobile channel of their own. And in-store self-service kiosks will help popularize remote ordering and accustom users to less traditional forms of payment that don't require a cash register.

In full, the report:

• Forecasts the growth of the mobile order-ahead industry in the US from 2015 to 2020, including its share of total QSR sales.
• Profiles brands that are leading the migration to mobile ordering.
• Examines the alternative commerce solutions that could help popularize mobile order-ahead.
• Explains the risks and drawbacks to launching a mobile commerce platform.
• Assesses the ways both large and small brands can create a mobile order-ahead platform.
• Determines which types of fast-casual chains are in the best position to benefit from mobile order-ahead.

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of mobile order-ahead.