Technology

Chipotle’s Digital Sales Grow Over 177% in Q4

While the rest of us mere mortals in the restaurant industry try to survive despite a seemingly never-ending pandemic, Chipotle Mexican Grill Inc. seems to be on fire. Much of their success can be attributed to their innovations in the digital space.

Let’s take a look at how this Mexican grill mega-chain emerged from an early pandemic slump with record digital sales due to online and mobile orders.

Chipotle’s Digital Mastermind

The fourth quarter of 2020 saw Chipotle’s digital sales up over 177%–a number that represents almost half of their total sales. Q3 digital sales grew by over 202% with half coming from delivery and the other half from Chipotlanes and in-store pickup.

By comparison, the last quarter of 2018 reported less than 66% growth in digital sales which made up close to 13% of the restaurant’s overall sales.

According to CEO Brian Niccol, digital sales now account for over $1 million in sales a year in each of their units. Just a few years ago, this number came in at a few hundred thousand dollars per restaurant. In a phone call with investors, Niccol offered their key strategies which included brand visibility, a disciplined creative and innovative approach, an engaging loyalty program, and “leveraging digital capabilities to drive productivity and expand access.”

And expanding access, they did.

The First Chipotlane Is Born

The fourth quarter saw the opening of 61 new restaurants, with 42 of those offering a Chipotlane. Even before COVID-19 struck, Chipotle’s management saw the writing on the wall and the need for quick service with mobile options.

In February 2019, the brand opened 10 Chipotlanes. These drive-thru lanes enabled customers to place their orders through Chipotle’s website or via their mobile app. Their purpose? To help boost digital orders.

By July 2020, the chain had opened its 100th Chipotlane. Today, 170 Chipotlanes are in existence. Their goal is to outfit 60% of their stores with updated drive-thru convenience. Gone is the need to place your order before driving up to the window. Today’s drive-thru customer simply orders on the app and drives up for a quick handoff.

Another benefit these drive-thru lanes offer is a reduction in third-party deliveries which reduce margins due to higher costs.

The Chipotle Digital Kitchen

Not one to sit on their laurels, Chipotle made the restaurant headlines when they opened their first digital-only restaurant called Chipotle Digital Kitchen. Highlands, New York is home to the first of its kind which opened in November 2020. Most orders are placed in advance on Chipotle’s app, their website, or through a third-party delivery platform.

There is no dining room. Customers that have not placed their order in advance, however, can walk into the restaurant and scan a code in the Digital Kitchen unit to place their order onsite.

One interesting addition is the lobby built to accommodate large catering orders. These two attributes are what set it apart from the growing ghost kitchen segment. While this unit is 3,000 square feet, they project future Digital Kitchens will reduce their footprint to 1,200-1,500 square feet.

AI-Inspired Innovations

The brand has also expanded its digital ordering technical prowess to include a reordering feature through Amazon’s Alexa and artificial intelligence (AI)-powered phone ordering. These AI-powered features enable phone-based voice assistance when ordering and the ability to reorder past meals. When customers place the same order, the system remembers it.

Nicole West, Chipotle’s vice president of digital strategy, told PYMNTS, “In addition to menu innovation, digital innovation is core to the experience we are looking to deliver to our customers.” She believes that offering different ordering methods ensures seamless engagement. “I think customers expect to be able to engage with the brand on their terms and to be able to order exactly what they want, at the time they want it, to arrive in front of them by the means they choose.” Now that’s customer service.

Chipotle’s Digital Rewards Program

At the start of 2020, Chipotle’s loyalty program consisted of less than 10 million members. Today, the number of members has almost doubled to 20 million. The brand is actively working at obtaining new members and engaging present ones.

To ensure operations could handle and process the growing digital initiated sales, Chipotle created a line specific for digital orders. This line is also used for third-party vendors such as DoorDash.

As a pioneer in the digital arena, Chipotle has also invested in the social media frenzy. You may remember their most viral campaign that resulted in more than 1 billion views on a single TikTok promotion—their #boorito campaign promoting $4 burritos on Halloween.

It’s an understatement to say that Chipotle’s digital innovations are paying off.

Chipotle’s net income for 2020 was $355.8 million, up $5.6 million from 2019. Their total revenue was $6.0 billion. As of December 31, 2020, they had $1.1 billion in cash, investments, and restricted cash, with no debt. They opened 161 new restaurants to bring the total to 2,768. They plan on opening around 200 new restaurants in 2021.

We wonder what they might have accomplished had a pandemic not been raging.

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