Chipotle Digital Orders Now Comprise 60% of All Sales

Need to Know

• Digital revenue accounted for a whopping 60.7% of revenue for Q2, the restaurant chain reported this week.
• Order-ahead sales have grown by 140% since the COVID-19 pandemic started, delivery sales have increased by 125%, and total digital sales have increased by 216% YoY.
• Due to the pandemic, overall revenue was down for the company, dropping 4.8% over the same time period in 2019.
• Chipotle is revamping several stores to focus on the order-ahead experience, installing Chipotlanes that serve as quick and easy access for customers who placed orders through the mobile app.

Analysis

Chipotle’s digital success continues to surge, as the company reported this week that 69.2% of its sales for Q2 came from online orders.

The digital sales showed a 216% in increase in digital revenue for Chipotle over this time last year, reflecting a change in consumer ordering patterns as a result of the COVID-19 pandemic.

“Encouragingly, since sales dropped in late March, we have been able to retain 70% to 80% of our digital sales gains, while recovering 40% to 50% of our in-store sales,” CEO Brian Niccol said on the earnings call. “This supports our thesis that digital tends to be highly sticky and was a key factor in helping improve our sales performance as the quarter progressed.”

“We are very proud of the investments we have made in digital and how that has played out for us over the last couple of months. I am very optimistic about how the Chipotle business with now the combination of a very robust digital business, combined with great culinary, great speed and just tremendous value is going to play out in the future.”

Order-ahead sales for Chipotle have grown by 140% since the COVID-19 pandemic led to widespread lockdown measures, while food delivery to private residences and offices has spiked by 125% over the same time period.

“We’re optimistic that the order-ahead transaction will continue to be a big driver of future growth, which could benefit both sales and margins element that has seen a meaningful acceleration,” said Niccol, adding that Chipotle’s rewards program now has “nearly 15 million enrolled members.” The company has also seen an increase in consumers returning to Chipotle’s digital platform for a second purchase.

While overall revenue was down for Chipotle, sitting at $1.4-billion for Q2 (down 4.8% from last year), the company has been posting remarkable digital success since the beginning of the pandemic. For Q1, Chipotle posted its best-ever digital quarter, with digital sales earnings of more than $372 million for that time period. The company has been investing in its digital capabilities since the beginning of the year, beginning with the addition of added incentives to its loyalty program, Chipotle Rewards, in February. After the pandemic hit, the company quickly offered delivery perks and incentives such as free delivery and rolled out added digital infrastructure such as Pepper, a Facebook-hosted ordering concierge.

The company has also taken a uniquely out-of-the-box approach to maintain customer loyalty and goodwill: last month, Chipotle launched an online farmers’ market on which consumers can purchase products directly from Chipotle’s supply chain, in a bid to both ensure the longevity of the farms that provide Chipotle’s ingredients and appeal to customers who have pivoted to grocery delivery during COVID-19.