Chipotle long rejected the notion of the drive thru prior to Niccol’s appointment. But now, it’s something the brand is simply adding to its digital flywheel. “Customers love the fact they don't have to get out of their cars as well as having a pickup time that is significantly faster than a traditional drive thru,” he said.
To date, Niccol said Chipotle has witnessed overall digital penetration for Chipotlane restaurants in the high 20s, with the majority of that driven by a higher margin, order-ahead and pickup transaction. That latter part is important. Chipotle will more than double the number of pick-up lanes in 2020 not just because it fits today’s convenience-crazed dynamic, but also because it strengthens its economic model by making a higher-margin channel more accessible.
Think third-party delivery, and the balancing act of keeping it viable.
Niccol said it’s a “little bit of a misconception” that the majority of Chipotle’s digital sales growth is coming via third-party delivery. He believes the service serves, in many cases, as an entry point for customers to see Chipotle in a new, convenience-forward light.
In other terms, they use delivery to break into Chipotle’s digital system, and the brand then sees gains in its order-ahead business as well. And the process starts to circulate throughout the company’s other efforts. “Delivery is proving to be just a great experience for people that maybe didn't have that occasion with Chipotle in the past,” Niccol said, speaking to the incremental nature of the business. “Now they believe it's convenient so they can have those occasions with Chipotle, both order ahead as well as delivery. So it's working nicely as a system between rewards, order ahead, delivery, and now with Chipotlane.”
When people get through the digital door, they're greeted by multiple paths. That’s Chipotle’s hope. And it will be critical in 2020 as some of the free deals lap and become less prevalent.
Also, Niccol noted Chipotle’s value proposition allows for room to pass along delivery costs to customers in the future, if needed. Today, the brand is more in acquisition mode, using delivery as a tool to get people into its digital ecosystem. But there’s price elasticity still to improve the delivery economics. Chipotle works with DoorDash and Postmastes.
“But I do think, ultimately, the delivery marketplace is not going to be an exclusive proposition,” Niccol said of possibly adding additional aggregators. “I think the delivery marketplace is going to be about giving customers access accordingly.”
The digital growth is physically manifesting for Chipotle, too. The company announced in December it was testing a tech-centric prototype in four new units of the following types: an urban store front, standalone restaurant with a Chipotlane pick-up window, and an endcap location with a Chipotlane. One features a walk-up window across from Wrigley Field in Chicago. It’s a smaller, 2,000-square-foot format with fewer seats, a customer-facing grab-and-go beverage case, and digital pickup shelves near the front door.