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December 2017

January 2018

Market for coffee is fueling restaurants, including Stumptown, Peet's and more

Smartphones are not the only addiction. A new generation of coffee addicts are making morning coffee stops part of their routine. Here's our theory: in the evening, people are interested in trying something new. In the morning, they want something reliable.

Chicago Tribune: Your morning fix is fueling Chicago's coffee boom, 2018-Jan-15 by Samantha Bomkamp

...Coffee builds a habit. When customers find a coffee drink they enjoy, they’re far more likely to come back every day — or at least several times per week — than they are for, say, a great burger, NPD analyst Bonnie Riggs said. 

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Coffee tends to produce higher profit margins than other food and drink businesses.

And coffee chains are expanding to capture the growth. Chain coffee shops increased their locations by 6 percent from 2016 to 2017, according to NPD. In all, the U.S. has almost 3,000 more coffee shops than it did five years ago. In Chicago, that includes smaller chains like Stumptown and Joe & the Juice. Stumptown opened its first Chicago location in December in the West Loop’s Ace Hotel, and Copenhagen-based Joe & the Juice opened its first Chicago location on the Near North Side on Wednesday.

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“I’ve got to tell you, I don’t think it’s going to slow down,” Coonan said of the broader coffee market. “I was nervous a couple years ago.”

Coonan said part of his confidence is tied to the growing desire by landlords to bring coffee retailers into buildings as an amenity for tenants. 

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Mallory Pilcher, Stumptown’s marketing director, said she feels there’s still a lot of room for coffee growth across the U.S. “So many parts of the country are just getting turned on to high quality, sustainably sourced, hand-crafted coffee,” she said. “Cafe concepts are evolving and menu options are expanding.”

Pilcher said the brand plans to roll out a loyalty program in the future to reward its regulars.

At larger sister brand Peet’s Coffee, which has a dozen Chicago locations, nearly a third of transactions earn loyalty points, and CEO Dave Burwick said the chain is working on “significant enhancements” to its app this year, including testing mobile ordering. 

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The rise of mobile ordering also is helping drive quick, habitual coffee purchases, Riggs said, because it makes people less cognizant of what they’re paying than when they hand over cold hard cash. The use of mobile ordering raises the chances that customers will opt to make multiple visits and spend more when they do, she said.

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Riggs said coffee sellers are finding ways to expand the market instead of fighting over the same group of java-loving customers.That’s helped by a focus on breakfast, which has seen growth while lunch and dinner slow, and afternoon snack time, when more people are justifying a cappuccino when they take a break from work, Riggs said.

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Customer visits to quick-service burger and gourmet coffee chains spurred by deals rose by 7 percent in the third quarter of 2017 compared with a year earlier, according to NPD, which called it the “strongest (traffic) seen in quite some time.” Customer visits not driven by promotions rose 4 percent. The burger and coffee categories together account for less than one-tenth of the total food service industry, but their growth was so strong they pulled the whole industry into positive territory, NPD said. It was the first time the sector recorded overall growth in a year and a half.

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Target adapting to the new retail environment

The ability of stores to adapt to the new retail environment will be realized in both small successful steps to change their behavior as well as new startegies and overhauls. Here's some evidence from Target. We assume that 70% of the footwear orders were NOT shipped from across the country but from a nearby store, leading to lower expenses and lower air pollution, too. 

Footwear News: Target Has Found the Secret to Getting the Most Out of Its Stores, 2018-Jan-9 by Sheena Butler-Young

“We’ve positioned our stores at the center of a continually expanding suite of convenient fulfillment options and made significant investments in our team, which enabled our stores to fulfill 70 percent of all digital orders in the November/December period,” said Target chairman and CEO Brian Cornell. “As we look ahead to 2018, we will build on the foundation we established this year by launching additional exclusive brands, enhancing our digital capabilities, opening approximately 30 small-format stores and tripling the size of our remodel program to more than 325 stores.”

He added, “We will also remain focused on rapidly scaling up new fulfillment options including Same Day Delivery, which will be enabled by our acquisition of Shipt and our recently launched Drive Up service.”

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The store that understands you best will win: Kroger, Amazon or Walmart?

Under competitive pressure from Amazon, Kroger is deepening its investment in the collection and leverage of customer data. This represents more than loyalty and rewards. Like Amazon and Walmart, Kroger wants to build a revenue stream by selling advertising to its suppliers. If you're a product manufacturer with items for sale at Amazon, Kroger and Walmart, those three companies are competing for your advertising budget. The store which can offer you the best return on your advertising will flourish, and that return is based on the ability of the store to capture and correctly analyze data about its customers. 

We remember that not too long ago, Target got in trouble for sending diaper coupons to a household where the teenage daughter had not yet told her parents she was pregnant. What next?

Ad Exchanger: Why Kroger Wants to Be a Walled Garden--And Why It's an Uphill Battle, 2017-Dec-14 by James Hercher

The revelation that Kroger is developing a data-driven ad platform, Kroger Precision Marketing (KPM), to launch next year underscores how brick-and-mortars are trying to exert control over their data in the same manner as an ecommerce company. Yet the goal of a true brick-and-mortar walled garden is fraught with challenges.

For decades, retailers sold anonymized data to third-party aggregators, but most are beginning to pull back on that side revenue stream, said Sean Cheyney, VP of North American business development for the retail ad tech company Triad.

“Retailers are starting to see that open data model as them losing control of their most valuable assets,” he said.

Kroger has alerted agencies and tech vendors that campaigns with KPM must run through 84.51˚, a data and targeting business that the retailer purchased from Dunnhumby in 2015, according to three different retail ad tech companies that have been told of the update.

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Nike bets on membership data

As competition in athletic apparel heats up, driving prices down, Nike has latched onto their successful membership drives for products like personalized sneakers and exercise tracking applications. Their goal is to capture the information they need to push aggressive innovation while improving both customer satisfaction and engagement. 

diginomica: Nike focuses on digital membership and “relentless flow of innovation”, 2018-Jan-3 by Derek du Preez

Nike CEO and chairman Mark Parker recently told investors that its this “strategic shift to digital” that is satisfying customers and will underpin the company’s future success. Meanwhile, CFO Andy Campion explained how digital engagement is creating a better “price-value relationship” with its customers.

CEO Parker said:

We’re focused on unleashing a relentless flow of innovation at a scale that our industry has never seen, bringing NIKE closer to the consumer in key cities and delivering with speed and using the power of digital to go deep and broad by rewarding our most active NIKE+ members, while expanding that community to hundreds of millions.

Parker explained how across EMEA Nike is “taking friction out of the delivery and return process”, where, in Berlin, it now offers same day delivery by leveraging inventory within the city. Similar initiatives will be adopted in Paris and London later this year. Whilst in Shanghai, it has built a digital studio that will focus on creative selling opportunities and leveraging “real-time data with platforms like WeChat and Tmall”.

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Restaurants, such as Grub Burger Bar, leading with loyalty in their marketing

When we spotted an ad for the Grub Burger Bar's loyalty program on CultureMap, we drilled down to see why the restaurant is promoting its program instead of its food. Their loyalty app was developed by Punchh which has been innovating apps for quite a few years now. The deeper we dug, we began to realize that we'll see more restaurants advertising their loyalty programs. 

eMarketer Retail: Restaurant Industry Gets Serious About Loyalty Programs, 2017-Sep-5 by Andria Cheng

Among consumers, loyalty programs have jumped in terms of their ability to drive restaurant visits, according to an NPD Group survey of 9,100 consumers last year. When asked what would entice them to visit restaurants more often, 46% of respondents mentioned loyalty programs. This was second only to price discounts, mentioned by 66%. The percentage of consumers who cited other motivators including “polite staff,” “competitor’s coupons,” or “pick and choose items” ranged from 10% to 31%.

Millennials, who focus on value and digital price comparison shopping, are particularly attracted to loyalty programs. A Lab42 survey released in June found that roughly three-quarters of millennials polled consider loyalty programs an important influence when making a purchase.... 

said Shyam Rao, CEO and co-founder of Punchh, a provider of restaurant marketing cloud software that counts Moe's among its clients. “[Many] brick-and-mortar restaurants are behind in terms of understanding who their customers are. There are consumers who love a brand and walk in a few times a week, and these brands have no idea who they are.”

Techcrunch: Punchh, The Platform That Connects A Restaurant’s Cash Register To A Customer’s Smart Phone, 2013-Oct-10 by Alex Williams

Punchh is a three-year-old company that started as a virtual punch card service. It is now targeting verticles, starting with the restaurant business. It provides restaurants with apps that integrate with POS systems so customers can scan their receipts, earn points or get rewards. In turn, the owner can ask the customer for a review that will be posted to a social network. Punchh builds private label apps that engage customers with games, campaigns and surveys that are tied to a loyalty program.

CultureMap (Advertising): Houston burger spot serves everyone a slice of its sweet rewards, 2017-Nov-30 by Promoted Series Correspondent

Grub Love
This isn't your average loyalty program. Grub Love understands your need for burgers, shakes, and Brussels sprouts, and rewards you with one point earned for each dollar spent with the Grub Love app. Fifty points equals $5 in rewards, and the points never expire. Plus, you can look forward to a free shake around your birthday and exclusive monthly offers. You can also purchase gift cards for friends, family, or yourself, and pay right from your app. Now through the end of the year, each gift card you buy through the app gets you an additional 10 Grub Love points.

Forget to tap "earn" when you ordered? No problem — you have up to three days to scan your receipt and receive credit. Share the love by referring friends, and earn points when they make their first purchase (your friend gets an extra 20 points on that first meal, too). Sign up for a Grub Love account here or through Facebook.

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