When Joe DePinto, 7-ElevenCEO, addressed the crowd from the main stage of the Restaurant Leadership Conference in April in Scottsdale, he sounded a clear alarm: "We sell food. The lines between dollar, drug, grocery and restaurants are all blurring. We believe the battleground will be food and beverages."
Restaurant industry vets in the audience may have dismissed the potential threat from purveyors of roller dogs and Slurpee drinks. But DePinto had reason to sound the alarm — something called "showrooming." The term "showrooming" refers to a customer at a retail store using his smartphone to scan the barcode of a product on display and then searching for better prices from online retailers (or e-tailers) to make a purchase.
Restaurant operators may still be asking, "What's the problem?" Customers are not likely to head into a restaurant, scan a barcode of a cheeseburger, and have Amazon.com ship a cheaper cheeseburger in time for lunch.
But DePinto went on to explain how convenience stores like 7-Eleven and even retailers are beefing up services to overcome the threat of showrooming. Some retailers are offering technology interfaces, others are cooking up in-store demos, and some aim to make shopping a one-stop experience by serving up meals. With these innovations, DePinto explained, retailers are getting into direct competition with restaurants. Added benefits such as fresh meals can drive more frequent visits to stores and diversify their revenue streams, making them less reliant on their core retail operation. Look to Costco, Target and Walmart as examples of major retailers serving fresh food inside their four walls.
How to Fight Back
So how can restaurants fight back and stay ahead of c-stores and retailers entering foodservice?
The answer is "convenient quality," or personalized, high-quality, just-on-time food offerings with a focus on great ingredients, customizable offerings, and allowing customers to order and pay from everywhere. Now that "84 percent of smartphone shoppers use their phones while in a physical store," according to a Google study, restaurants will benefit if they allow customers to use smartphones to review the full restaurant menu custom-build orders ingredient by ingredient, and fire their order directly to the prep line for production — even while in-restaurant.
Restaurants have the inventory, the equipment, and the skilled kitchen crew to handle complex orders. Self-service ordering platforms have the rules in place to send orders to the back of the house for precise, just-on-time production. Putting these together means the customer can collect an order at precisely the right time for takeout or dine-in, without waiting in line, perusing the menu, or waiting for their friends to order (self-service ordering is great for group orders). While retailers and c-stores have upped their game significantly over recent years and offer far more than the grab 'n go food of the past, they will struggle to keep up with restaurants that have had years to create a convenient ordering experience, strong food prep operations, and right-on-time pickup experience. These are the areas in which restaurants can and must be superior.
Showrooming may sound like the next biggest fad, but it's here to stay. And retailers will go to great lengths to add value and retain customers. The restaurants that can adapt by providing customers with a better quality product and a more convenient experience through mobile ordering will be the restaurants that survive and thrive in the age of the smartphone. The alternative is not too appetizing — it could mean going the path of Borders, Tower Records and Blockbuster.
Noah Glass is the Founder & CEO of online and mobile ordering pioneer Olo. Since 2005, Olo has raised $13.75M from PayPal and leading venture capital firms. Olo has been featured on Good Morning America, The Wall Street Journal, and ABC World News.