What Restaurants Can Learn from E-Commerce Giants

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by Zach Goldstein — CEO and Founder, Thanx
Source: www.fastcasual.com, April 2022

Two years into a global pandemic, it’s clear that a massive change in consumer behavior permanently altered the restaurant industry. Consumers are opting for the convenience of digital purchasing, creating a boon for third-party delivery providers and the biggest restaurant chains with the deepest pocket. We’ve seen this story before in other industries — from e-commerce to travel — and it creates an opportunity for those who quickly adapt to the new environment.

When pandemic lockdowns hit, brands with strong first-party ordering and customer relationship management performed demonstrably better than those without. It’s no longer a question of whether restaurants need their own digital ordering solutions to compete with third-party marketplaces; these are table stakes. But it’s not just about protecting margin — as I foreshadowed in The Four Horsemen of the Restaurant Apocalypse — consumers prefer it. Six in 10 delivery customers say they’d prefer to order directly from a restaurant, even though a majority of operators use a third-party provider, according to the National Restaurant Association. Simply adopting ordering tech isn’t enough; restaurants must leverage the “data exhaust” created from these digital efforts to compete and win.

Newly digital-enabled restaurants are sitting on troves of information for the first time in their history; used thoughtfully, this data can help grow their customer base and increase loyalty just as effectively as standout food. The next generation of restaurant winners will utilize their in-depth knowledge about customers to maximize customer lifetime value; they will need the right technology and strategy to do so successfully. It won’t replace menu innovation and top-notch service, but data and personalization is now just as important. How can a restaurant set itself up for success in this new environment? They can start by learning from the successes and failures of retail businesses in the age of Amazon and other eicommerce businesses.

The ability to attract customers through digital channels is just as important as the product you send out.

In e-commerce, brands often launch before they even have a product ready to send out into the world. They test Instagram ads and other customer acquisition strategies, honing in on the cost of acquiring a customer and converting them to a loyal member. Those with customer lifetime values that far exceed customer acquisition cost have been minted instant “unicorns” even without the revenue to justify it.

Good data gives restaurants the opportunity to look at existing customers and build an expanded audience based on existing customer profiles — according to Thanxresearch, nearly 70% of restaurant revenue comes from just 25% of customers and that concentration is increasing. Digital advertising makes it easy to identify people who should be customers, targeting them with messaging and offers they’re likely to respond to, encouraging them to make their first digital purchase. All of this can be set up as automations, targeting both new and existing consumers with the exact right promotion at the exact right time on the exactly right channel. Yes, blanket spray-and-pray email is dead.

Eliminate all forms of friction in the ordering and payment process.

In e-commerce, customers are conditioned to the same comfortable and predictable experience over and over. Placing an order can happen in as few as a couple clicks and for returning shoppers that can be as simple as one click. Retail giants streamline the process with tactics like storing credit card information and optimizing for as few steps as possible to go from search to purchase. Furthermore, with deeper knowledge about existing customers, e-comm leaders use automated suggestive selling to maximize basket sizes — Amazonsees as much as 35% of e-commerce revenue from product suggestions.

For restaurants, most brands now understand that this requires easy-to-navigate online menus featuring bold imagery. But it’s shocking how many brands are lacking in one-click reordering and still offering the option for guests to remain anonymous (guest checkout) which eliminates the opportunity for this 35% upsell lift. There’s a reason neither Amazon nor Doordash allow guest checkout. Technology that stores and tokenizes credit card information is ubiquitous in e-commerce yet Thanx is actually the only solution in the restaurant space offering this ease of use — the result is a300% higher data capture vs. legacy loyalty.

Make the transition from first-time to loyal customer seamless.

Loyalty programs like Amazon Prime have kept customers coming back for more. Doordash has one in Dashpass that delivers massively higher customer lifetime values. Restaurants must do the same to win. By requiring customers to identify themselves on a first purchase, remarketing, upselling, and sending personalized “hooks” to get them to return is easier. With all customers now “known”, their behavior can tell you a lot about how you should engage with them. Do they prefer to order online or in-store? Do they order the same thing every time? Might they be tempted by an offer for a different daypart, or different menu item? It’s no surprise that digital growth is leading to data growth — in McDonald’s six biggest global markets, 25% of sales are now coming through digital channels; at Starbucks, the number is over 70%.The key to activating all this newfound data are automations — because restaurant marketing teams are far smaller today than their retail counterparts. Every brand must know their conversion rate from second to third visit, for instance, and have the triggers in place to continually improve it.

The time is now.

Amazon crushed small retail. Restaurants can escape the same fate by investing in the tools they need to compete with large third-party delivery companies and massive restaurant chains.

This is not a story of impending doom. The restaurant business is inherently hyperlocal. If a restaurant can get a customer’s attention, there’s no reason they wouldn’t be willing to order direct from you vs. a third party — they just have to remember to do it.

This is why a robust digital strategy and loyalty program — one that makes it completely frictionless for guests to join while adding real value — is critical to a modern restaurant’s success. When done right, distinctiveand individualized loyalty programs reach guests where they are and provide incentives for the sort of behavior that’s beneficial to business.

ZACH GOLDSTEIN