Panera avoided Starbucks' biggest mistake and reached a $1 billion milestone
On Tuesday, the fast-casual chain announced it was on track to surpass $1 billion in digital sales, or sales made through kiosks, mobile, and web, in 2017.
At the end of the first quarter, 26% of Panera's sales were digital. Blaine Hurst, Panera's president, said that figure could soon be 33% and one day as much as half of all sales, though that's not necessarily the chain's goal.
Hurst and Panera CEO Ron Shaich have maintained that the key to Panera's digital success has been their emphasis on a "systematic fix," as opposed to simply adding digital ordering or installing kiosks, like some chains are doing.
"I do think that there is this idea that you can add the tech and it's all good," Hurst said. "There's more to the story than most people are willing to bite off."
Hurst specifically mentioned Starbucks, which reported in January that problems caused by mobile ordering had contributed to a 2% drop in customer transactions. The coffee giant, which exceeds Panera's mobile ordering percentage with 29% digital sales last quarter, has been searching for solutions to avoid the bottlenecks that are created when a location receives an influx of mobile orders. The chain is considering adding pick-up shelves and texting customers when their orders are ready.
But Hurst says that it's easy for chains to fall into the trap of quick fixes without looking at underlying problems.
The biggest difference between Panera's strategy and that of a chain like Starbucks, Hurst says, is the preemptive work the company put in before digital ordering caught on, catching potential roadblocks before they become major problems.
Prior to the rollout of Panera's new tech initiative, dubbed Panera 2.0, in 2014, Hurst and Shaich spent about 100 hours a week in a Massachusetts Panera location observing and pin-pointing exactly what was causing issues. The company's big tech changes, such as installing kiosks, were coupled with behind-the-scenes adjustments to make operations faster and easier, such as simplifying kitchen display systems.
Before rolling out its tech push, Panera customers were waiting eight minutes to order food. Today customers wait approximately one minute, The Wall Street Journal reported. Meanwhile, Starbucks said in January that the increase in mobile orders was creating bottlenecks in certain locations, which not only forced customers to wait longer to order, but also convinced some potential coffee drinkers to turn around and leave stores when they saw long lines.
Panera is far from the only chain investing in digital in 2017. From Starbucks to McDonald's, mobile ordering is the next fast-food frontier, and chains are feverishly trying to keep up.
While Hurst cautions against chains adding mobile without thinking about the consequences, he also realizes that an early lead doesn't guarantee Panera's continued digital dominance.
"I clearly think everybody is going to do some version of what we're doing," he said. "The question is if we can stay one step ahead."