When the internet emerged in the late 1990s, it had an almost immediate impact on the retail sector as it became an obvious alternative channel for sales. The problem was it sat uncomfortably with the existing store-based model, and there were worries that it was cannibalising revenues from this traditional channel.
Needless to say, senior executives were protective of their departments and hostile to recognising this new way of serving customers. For many years the channels were run separately, but as digital increased in importance and customers embraced these new ways to purchase, the retail industry worked hard to integrate them in order to deliver a seamless experience for the shopper.
In reality, behind the scenes, there is still plenty of work to do for most large retailers. When you look under the bonnet, there remains much evidence of sticky tape and elastic bands still holding things together. The headaches still persist for many companies as they seek to build a fully integrated multi-channel business with a single view of the customer and stock.
Hospitality has been largely insulated from any painful disruption from digital as it continued to be predominantly focused on its dine-in business, while online/home delivery could be conveniently outsourced to the third-party aggregators. But covid-19 has rather changed things. It pushed consumers to fully utilise the digital channels, and hospitality operators had to cobble together solutions to address this demand or watch their businesses wither.
What this has done is force many companies to operate as multi-channel businesses – whether they like it or not. With this rapid, largely unplanned shift and adoption of new technology, it is maybe unsurprising that 50% of consumers think hospitality venues are behind other leisure and retail operators when it comes to their use of technology, according to KAM Media.
It is imperative that businesses address this perception, because the digital transformation of the sector is fully underway, and technology will continue to impact the way the hospitality industry operates. Evidence of this rapid change is the fact McDonald’s says it is now providing 11 ways for people to get a meal at its newly designed outlets, on which it is spending £250m. As well as good old walk-in there is drive-thru, self-service kiosks, the McDonald’s app, ordering through delivery firms and so on.
Across McDonald’s major markets, digital sales now account for around 30% of sales, up 60% on a year ago, while at US-based Panera, 49% of sales are digital-related. This has led to the JAB-owned company (which is also the parent company of Pret A Manger) to introduce a 100% digitally enabled store, ‘Panera To Go’. Many others, including Taco Bell, Wingstop and Chipotle, are doing exactly the same.
Yes, these are all QSR brands, but there will be no escaping the impact of digital on all foodservice businesses, because the direction of travel of consumers is obvious. It is worrying, therefore, that 80% of companies don’t have a set budget for digitalisation, and 63% of operators feel they haven’t invested enough in digitalisation for their business to date, according to Vita Mojo.
Hospitality companies should avoid falling into the same traps as many retailers before them and underestimate the effect digital will have on their businesses. Leaders have traditionally been wholly focused on finding sites, dealing with fit-outs and sourcing extractor fans, but how much expertise do many of them have in the likes of SEO, data insights, social media, CRM and marketing strategies with Google and Meta? The other big issue that has stymied retail is the continued operation of their various channels in silos, which is incredibly damaging. All people within an organisation need to be fully engaged with the digital elements.
There is no escaping the immediate focus on addressing chronic staff shortages and dealing with the rampant inflationary environment, but hospitality companies from across the whole industry should not stick their heads in the sand with digital. It is not going away, and if you are in any doubt, then take a closer look at the retail sector and ask your customers.
This column was first published on Propel where Retail Insider editor Glynn Davis writes a weekly column. We are grateful to Propel for permisson to reproduce the column here.