McKinsey: Digital capability and online ordering critical for restaurants during coronavirus crisis

Conor Ward
Author Conor Ward
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“A strong online ordering presence, digital loyalty programs, and robust customer relationship management (CRM) systems have been lifelines for restaurants during this crisis, as levels of digital engagement among consumers have soared.” - McKinsey

The globally renowned management consulting firm McKinsey & Company has identified digital capability as a crucial factor in the performance of restaurants during the coronavirus crisis.

McKinsey looked at the pandemic’s impact on restaurants to date and what the future holds for them, with a focus on the US market.

They point out that the economic damage of COVID-19 on the restaurant industry has been distributed very unevenly. For instance, while pizza chains have maintained or increased sales during the crisis, casual dining and fine dining restaurants have seen their revenues decline by as much as 85%.

For some fine dining establishments, revenues have been wiped out entirely, with the doors closed for dine-in during the lockdown.

Several key factors in performance of restaurants

According to McKinsey, the performance of a restaurant during the crisis has depended largely on the following factors:

  • Off-premises versus on-premises sales mix
  • Reliance on day-part occasions
  • Urbanicity
  • Digital maturity
  • Role of value

On the digital maturity point, they offer the following analysis:

“A strong online ordering presence, digital loyalty programs, and robust customer relationship management (CRM) systems have been lifelines for restaurants during this crisis, as levels of digital engagement among consumers have soared. If trends in China are any indication, consumers could remain more digitally engaged even after the crisis. Starbucks China, for instance, saw a 12 percentage point increase in the share of digital transactions post crisis.”

And regarding the off-premises versus on-premises sales mix, they say:

“Unsurprisingly, restaurants with high off-premise sales prior to the crisis are faring better than those that relied more on dine-in sales.”

Online ordering giving businesses a vital edge in crisis

So from McKinsey’s analysis, it’s clear that businesses which already had a high proportion of off-premises sales have been well positioned to cope and continue generating turnover during the crisis.

Those with pre-existing online ordering systems were able to continue with pick-up and delivery operations when dine-in was taken out of the equation. And the more advanced and active the digital capability of the business the better, with McKinsey highlighlighting the vital role of digital loyalty programs and CRM systems.

For our part at Flipdish, we’ve been working with lots of new customers to introduce online ordering systems and help them to pivot their operations during the crisis. This has allowed many to keep making sales by rolling out takeaway services. Many have made a real success of these new ventures, while other businesses have reopened quickly by leveraging their digital capabilities and making the necessary adjustments to their operations. Meanwhile, managed marketing services help to get their message out and re-engage customers.

A smart multi-channel approach

As the pandemic develops and lockdown measures are eased by governments, the emphasis in the hospitality industry is switching towards plans for full reopening for dine-in. However, this will not be totally straightforward, with strict on-site social distancing and hygiene measures required. So making a significant pivot to pick-up and delivery operations through online ordering could still be an attractive option.

However, adopting a mixed multi-channel approach looks like a really smart play at this stage. You can put online ordering and takeaway options in place side-by-side with reopening your dine-in operation, opening up all the available options.

It’s always prudent and strategic to put multiple streams of revenue in place. We’ve seen from McKinsey’s report that the businesses who already had this fared much better on average when COVID-19 hit the industry.

Moving past COVID-19 will not be simple and there may be setbacks and further lockdown measures, so it makes sense to future proof and crisis proof your business against this (or another potential unexpected crisis) by having a fully-developed business model in place, with several streams of revenue.

Having various options available also caters to changing consumer habits and preferences. McKinsey quoted the example of China, where the signs are that consumers will remain more digitally engaged even after the crisis.

Restaurant Self Service Kiosks2

Digital also making a difference for dine-in

Don’t forget that digital products are not just relevant to takeaway - they can also enhance your dine-in operation when it does return, by boosting efficiency and improving the customer experience. Table ordering and self-service kiosks can play a vital role in this.

Even as you continue to steer your way through it, there is a lot to learn from the coronavirus crisis. Shrewd planning and taking advantage of digital systems can help businesses to survive and thrive, both for now and into the future.

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