Dive Brief:
- Chipotle's digital sales grew 216% to $829.3 million and accounted for about 61% of sales during Q2 2020, according to an earnings release. Adding on the company's $372 million in digital sales for Q1 2020, Chipotle’s year-to-date digital sales surpassed $1.2 billion.
- Increased digital awareness via advertising, new delivery partnerships with Uber Eats and Grubhub and expanding its digital capabilities into Canada has attracted new customers, reduced friction and increased convenient access. Partnering with all three major third-party aggregators has increased the amount of orders, reduced delivery times and cancellations and improved overall customer ratings.
- A little over half of these sales are coming from order ahead and pick up transactions, with the rest coming from delivery, Chipotle CEO Brain Niccol said during an earnings call with investors on Wednesday.
Dive Insight:
For the first time in about three years, Chipotle's same-store sales declined 9.8% during a single quarter, showing that even the most successful chains are hurting during the pandemic. Comp sales improved from a negative 24.4% in April to a positive 2% in June, however, increasing 6.4% so far in July, according to the release.
Even during the pandemic, digital is a bright spot for the chain, following Chipotle's investments over the last two years in a second makeline, pickup shelves, Chipotlanes and a rewards program. Now that the restaurant has already surpassed $1 billion in digital sales during the first half of the year — it did over $1 billion for 2019 — it could easily reach $2 billion in online sales by the year's end and replace some lost dining room sales.
Even after dining rooms started reopening, digital represents 50% of July sales so far, Niccol said, adding that the chain has only been able to reclaim 40% to 50% of in-store ordering so far.
"I think [with] some of the customers that have shifted from in-store to digital, what we've seen is their tickets have gotten bigger because they're ordering in groups," Niccol said. "That helps explain why we're down in the dining room because you just don't have the same occasions that you used to have with people driving to work and having that lunch individual occasion."
Order ahead, which Niccol said was the chain's fastest growing area of digital, grew 140% while delivery was up 125% compared to the pre-COVID-19 period, CFO John R. Hartung said during the call.
"With free delivery promotions likely to be less frequent moving forward and us pivoting more aggressively toward Chipotlanes, we are optimistic that the order ahead transaction will continue to be a big driver of future growth, which should benefit both sales and margins," Niccol said.
The company, which is opening its 100th Chipotlane in July, plans to build up 150 to 165 Chipotlanes by the end of this year. It plans for 60% of its newly constructed restaurants to feature this channel in 2020, increasing its portfolio to over 70% Chipotlanes in 2021, Hartung said. It says it will hire an additional 10,000 employees on top of the 8,000 employees hired since May to support this digital growth.
The company also launched its concierge bot on Facebook Messenger, group ordering and complete customization, which is helping create a more seamless ordering experience, Niccol said.
Rapid growth from its rewards program, which reached nearly 15 million enrolled members by the end of the quarter, has helped digital sales growth as well. The program was launched 15 months ago and the rate of enrollment has roughly doubled during the coronavirus crisis, Niccol said. These members have higher frequency of transactions compared to non-members.
"It's early days, but we are starting to leverage this growing installed base with personalized promotions to incent[ivize] behaviors, especially considering more than 70% of current digital orders are from our members," Niccol said. "We're also using this tool to help make our digital platform stickier by reengaging customers if their usage drops."
