Can the restaurant industry learn from the mistakes of retail?


CJ Gaffney, director of strategic planning, Partners + Napier, believes restaurants can learn several lessons from their retail predecessors to avoid falling into what he calls, “the ugly middle.”

By CJ Gaffney, Director of Strategic Planning, Partners + Napier

The “ugly way” never lasts. Neither in retail nor in restaurants. What we’re seeing right now is a situation very similar to what the retail industry faced in 2008 — too many options and not enough money for everyone. Those who survived this retail oversaturation were split on one of two sides of the spectrum: either focused on speed and efficiency, or on delivering an elevated experience.

Now, as Eugene Lee, CEO of parent company Olive Garden recently reported, we have restaurants growing twice as fast as the population. A similar contraction is likely.

The parallels between the restaurant and retail industries have been well covered, but we wanted to know what restaurants can do to be successful. We spoke to some of the restaurant industry’s thought leaders to find out what works, what doesn’t and what to expect next. The good news is that there are several lessons restaurants can learn from their retail predecessors to avoid falling into the ugly middle: know the power of human connection, diversify your revenue streams, and differentiate yourself from your competition.

The power of human connection
Walk into a McDonald’s and you’ll likely place your order at a touchscreen kiosk. The chain began rolling out kiosks in 2015 and plans to open 1,000 kiosks per quarter through 2020, aiming to recoup nearly $2.7 billion in lost sales. However, a recent survey shows that diners are not fans of kiosks: 78% of customers say they would be less likely to go to a restaurant with automated ordering kiosks.

Why wouldn’t a fast food customer want to get their food even faster? Because people go to restaurants to feel cared for. They outsource this service, and by removing human interaction entirely, customers don’t get the experience they’ve been conditioned to.

At Domino’s, on the other hand, it’s a different story. You can order online or through your favorite smart assistant, but you get to know the name of the person making your pizza. Then you can use the tracker to track your pie’s journey from the time it’s made to the time it arrives at your doorstep. They use technology to improve an otherwise impersonal ordering and delivery process, providing a level of transparency that makes customers feel more connected.

Diversification of income sources
Los Angeles-based Moon Juice is a prime example of diversification done right. Owner Amanda Chantal Bacon realized earlier than most that juice shops were no longer a sustainable business model – they had become elitist, overpriced and oversaturated. But rather than shut down his business and move on, Bacon took stock of what made his business worthwhile. Its packaged powder supplements sold very well and had a strong following. So she started a wholesale herbal supplement business in addition to her stores, with fantastic results.

Differentiate yourself from competitors
A strong brand image is a great way to stand out in a crowded category – and it starts with a brand promise that is made and kept. This promise should evolve into a goal that unites the front of the house and the back of the house, for an experience that stands out for customers.

BurgerFi, a fast-casual chain launched in Florida in 2011, managed to break through the burger clutter and become one of the fastest growing food chains in the United States by using a strong product differentiator to create a higher goal. They promise to use beef from the best 1% of all beef in the world. The goal that unites them is that their burgers aren’t towering meat-and-cheese cliches – they’re unique, just like the people they make them for.

Each restaurant has the opportunity to adapt either by connecting more deeply with customers, by diversifying or by differentiating themselves.

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