The digital fuel
Chipotle’s growth is opening up, as Hartung noted, because the fast casual’s accessibility has. There are a lot of different dining occasions now, and many of them were set alight by COVID-19 lockdowns.
The brand’s digital business grew 216.3 percent in Q2, year-over-year, to nearly 61 percent of total sales, Chipotle said Wednesday. It accounted for $829.3 million in the quarter—the company’s highest quarterly level ever by some distance.
To an earlier note, Chipotle’s Q1 digital business lifted 81 percent to $372 million (a company record at the time). That was more than quadruple Chipotle’s digital gains from three years ago. In Q2 2019, it was $262 million. The previous Q4, digital accounted for just 12.9 percent of sales.
Naturally, these are not average times and the results reflect that. Chipotle’s in-store ordering is down about 37 percent, and the brand said it’s reclaimed only about 40–50 percent of dine-in business.
Chipotle’s same-store sales declined 9.8 percent this past quarter as total revenue fell 4.8 percent to $1.36 billion, its first decline in at least 14 quarters.
Yet performance has turned of late. Here’s the cadence of comps in recent months:
- April: –24.4 percent
- May: –7 percent
- June: 2 percent
- July (to date): 6.4 percent
Niccol said, even with in-restaurant dining returning, Chipotle’s digital momentum has stuck with a mix of nearly 50 percent in July.
As of last week, only 30 restaurants remained fully closed (mostly in malls and shopping centers). Chipotle began reopening lobbies in the middle of May and currently has roughly 85 percent of its units offering limited in-restaurant and/or patio dining, with the remaining open for off-premises business.
Since sales troughed in late March, Chipotle has retained 70–80 percent of its digital gains while recovering 40–50 percent of in-store sales. While it’s fallen back a bit in July, it’s the reason Chipotle has returned comps into positive territory, even measured against a 2019 run that saw same-store sales climb nearly 10 percent.
Niccol credited some of the growth to partnering with all major third-party delivery aggregators. The brand deploys DoorDash for direct service. Expanding options led to an increase in orders, a reduction in delivery time and cancellations, and an improvement in overall customer ratings, Niccol said.
And as it has for some time, Chipotle continues to look at third-party delivery as an acquisition tool for its digital suite.
“We've heard from our consumers, if you look at the qualitative side of it, hey, look the convenience of ordering ahead and picking up was something they discovered as a result of bringing them into our business through the delivery channel, which I think is kind of surprising,” Niccol said. “I don't think people realized that [customers] would join the Chipotle digital system because they came in through the delivery occasion. We brought them into the system and then we gave them the experience of the order ahead.” Chipotle’s order ahead is growing about 20 percentage points faster than its delivery.
Currently, about half of the 50 percent mix is coming from order ahead and pickup transactions, while the remaining flows from delivery. The growth in pickup stems from less frequent free delivery promotions, Chipotlanes, and consumers realizing the value of a pickup order with no fees, Niccol said.
Over time, Chipotle hopes to migrate delivery business to not just an acquisition tool, but also to become an occasion. One where it won’t mind the trade-off between delivery and order ahead. The chain started charging $1 for delivery in Q2.
Niccol said a big lure for guests on the white-label side is its rewards attaching to direct channels. This received a pandemic boon, too. Chipotle has added about 3.5 million loyalty members since April.
“Obviously the fact that so many people switched to our delivery and digital business over the last couple of months really enabled us to get people to engage in the rewards program,” Niccol said. “The thing that has been really refreshing is a lot of folks that have joined our rewards program have been new users or light users.”
“And so, we're already using these customer journeys to start influencing behaviors so that we can have them [become] be a more frequent customer,” he added. “And I think that's going to prove to be a nice tailwind for us in the future because I don't think we're done at 15 million. I think 15 million is going to become 20 million and so on and so forth.”
In early days, Chipotle witnessed higher frequency of transactions from rewards members versus non-members. Niccol said they’ve started to leverage this growing installed base with personalized promotions to incent behaviors, especially given more than 70 percent of current digital orders are from loyalty users.
“We're also using this tool to help make our digital platform stickier by reengaging customers if their usage drops,” he said.