Chipotle’s Digital Sales Top 18%
Chipotle's customers are embracing the fast-casual restaurant's digital platform to account for almost one-fifth of sales.
For Q2 2019, Chipotle’s digital sales growth skyrocketed 99% year-over-year to $262 million representing 18.2% of sales.
"Our digital system ... reduces friction and creates a convenient and enjoyable way for our guests to experience Chipotle. Delivery remains a key driver of our digital growth given enhanced capabilities on our app and website, as well as our expanded reach," said CEO Brian Niccol in an earnings call with analysts.
For the quarter, the fast casual chain reported 10% comparable restaurant sales growth that included nearly 7% transaction growth, restaurant level margins of 20.9% and 39% year-over-year growth.
Operationally the chain has made changes to reduce friction for both customers and staff alike. Mobile order pickup shelves are available in all relevant locations and digital make lines have been added to almost 2,000 locations. “…We are modernizing and making the customer and team member experience more efficient,” said Niccol. The test of Chipotlanes, pickup windows dedicated to digital order pickup, has expanded to 16 locations.
Q2 marks the sixth consecutive quarter of accelerating comparable sales, “which reinforces our view that when we connect with guests through culturally relevant marketing … and provide more convenient access with less friction, they respond,” said Niccol.
Betting on Burritos
For example, customers responded to Chipotle’s National Burrito Day (April 4) promo on social media and digital in record numbers. The efforts helped drive the chain’s highest sales day in its history, Niccol said.
“More importantly, it was another opportunity to acquire customers and transactions by introducing them for the convenience of delivery, and we are seeing increased new customer retention with higher levels of delivery sales after the promotion,” he added.
More than 95% of locations offer delivery, which continues to drive incremental sales. "We continue to see residual lift in delivery sales that last beyond any promotion and have seen very little guest overlap between our own in-app delivery and our third-party delivery partner apps," Niccols said.
Delivery remains the fastest growing part of Chipotle’s business “with a relatively small portion being associated with free delivery promotions,” said CFO Jack Hartung.
Chipotle has expanded its benefits to include tuition assistance program and a new crew bonus program that gives hourly employees the opportunity to earn up to an extra month’s pay each year based on the restaurant achieving certain performance in food safety goals. “This is another example of investing in our most valuable asset, our people,” said Niccol. And manager and crew turnover rates have "come down nicely over the past year,” he added.
After its launch on March 12, Chipotle's loyalty program has grown to 5 million members. The fast casual chain is ramping up efforts to use customer data to more effectively target and engage.
It is early days, but with the handful of marketing campaigns run to date, “…We’ve been really pleased with our ability to influence behavior So as the population gets bigger in the rewards program, and we get more fine-tuned … our goal is to then further drive behaviors that makes sense for the customer and … for Chipotle,” said Niccol.
Chipotle remains bullish on its future. "...What really excites me is that I believe we are still in the early stages on many of our key initiatives and by continuing to execute and get better which we are committed to doing, Chipotle is well positioned for future growth," said Niccol.