Hi Square Sellers! For this Food & Drink Seller Insights feature, let’s focus on some key strategies to drive value for your customers over the long-term.
CURBSIDE
Curbside pick-up has been the lifeline of Food and Drink sellers throughout lockdown guidelines and has been well-documented. The main point to be reiterated here is there is every indication that curbside and no-contact pick-up is here to stay in some capacity. It’s a safe format for customers and a natural output to online sales.
From most operators’ perspectives, curbside pick-up is easier than the logistical challenge of in-house delivery or the fee structure of third party delivery services. The curbside pick-up feature on the Square Online Store makes the mechanics straight forward but does require both customers and service staff to learn new behaviors and order flow. There is still a lot of important work ahead in order to make the end-to-end experience seamless for the customer and restaurant staff.
PRE-ORDER
Although pre-order goes hand-in-hand with curbside pick-up, it might serve us well to think of it as a category all to itself as we think it may affect even small, individual in-store sales in the future. It’s easy to envision a world where customers continue to look for ways to reduce their physical transactions with community surfaces, as well as minimize their time in shops, due to the challenge of social distancing. Accommodating pre-order sales for in-store pick-ups could be a competitive advantage. Card Not Present rates pose the main challenge to the sellers.
All this goes to support the idea that taking one’s food and beverage business online is not a temporary pivot designed to survive through shelter-in-place guidelines. Long term, viable F&B business models most likely will require strong online sales to compliment their in-store and walk-in revenue.
CREATIVE DELIVERY SOLUTIONS
One theme we’re discovering with successful Covid-19 adaptations involves sellers recapturing their own distribution options. Now that delivery constitutes such a large portion of total sales, some sellers are finding creative solutions instead of relying on third party delivery services. As we know, although these services can drive new customer acquisition and sales, they come at a very steep price in terms of fees. 30%+ cost margins are common which may not be a sustainable model, given the new sales mix. These fees also necessitate charging higher prices to customers, which lowers demand and the value they receive.
NEIGHBOURS HELPING NEIGHBOURS
Porridge + Puffs, a seller in Los Angeles, has developed a smart approach to delivery for its loyal customer base. In emails to customers for curbside pick-up, they include a reminder for neighbours to consider who near them might need a meal but aren’t able to pick up. They’ve had really good results. They’re seeing some of their customers checking in advance with other neighbours for pre-order. The neighbours will start a group email asking anyone else who wants to place an order and they will facilitate the pick-up. The neighbours then rotate the pick-up person each week. Some are having as many as 10 orders, delivered by a neighbour to other surrounding customers. It’s micro-communities coming together and it’s inspiring.
The neighbours placing the orders will leave a message in the notes section during check-out of the Square Online Store alerting the restaurant that the designated neighbor will be picking up the order. The restaurant supplies the customer with gloves so they can safely deliver the food and place outside the doors of the expecting neighbours. These customers already have some connections to each other and that will only be true for some specific sellers-but it’s a great, grass-roots solution worth considering.
HYPER-LOCAL GROCERY
Douglas, an innovative corner store in San Francisco, launched a pre-order meal hub with restaurants not available on traditional delivery services. Using their Square Online Store, they offer a dozen local restaurants meal options that rotate throughout the week. Customers pre-order a day in advance and then pick up at designated times at the store in a no-contact format.
They have been able to create a real synergy between their small local grocery store and a network of restaurants that are not subject to paying a delivery fee. This format also gives the operators a lot of flexibility in terms of how many meals they need to prepare. Minimizing food waste is especially important when every sale counts. It’s a strong draw for Douglas and a new creative distribution point for local restaurants. It will be interesting to see if this model scales to other neighborhoods throughout the country.
SELLER-BUNDLING
When Ritual Coffee Roasters in San Francisco converted one of its cafes to a general store model, they curated high quality and hard-to-find products from other local businesses: custom pastries, artisan breads, commodity products from their wholesalers, and other interesting retail products. This curation process adds a lot of value for customers. The offering can be unique to the business when approached creatively. The strength of individual small businesses can be multiplied by joining forces, cross-promoting and cross-selling.
RESTAURANT/GROCERY/RETAIL
The ‘general store’ pivot was one of the first successful adaptations to the crisis and there may be long term traction to this approach. All the sellers we’ve spoken to that employed this strategy plan to continue to offer a wider spectrum of adjacent products post-Covid.
We’ve seen so much food spending displaced to the grocery segment that restaurants and cafes have an opportunity to move towards hybrid, local models that offer a wider range of food products and even retail. If a restaurant’s primary mission is to feed its community and empower its team, that can now be achieved more successfully with a diversified and innovative approach to online and offline sales with multiple product categories, some made in house, some purchased through wholesale suppliers, and some bundled from other local small businesses. Whether a restaurant is a sit-down model or Quick Service Restaurant (QSR) format, this shouldn’t be seen as a divergence from the main focus of the restaurant, but a way to fortify the brand and offering.
MENU + OFFERINGS
Restaurants and cafes might want to explore many different formats above and beyond made-to-order meals. Given the new set of constraints of Covid-19, there is tremendous value for customers in providing a wide variety of formats available, not just for in-store consumption or individual meals in a to-go box. There is an opportunity to create some very unique and attractive meal kits. These can be structured towards the individual, a family or special occasion meal experience or target certain segments of the day: brunch, well-crafted dinners, baked goods, or cocktail kits where allowed.
FAMILY MEAL KITS
We’re seeing good success with sellers creating value-driven meal kits that accommodate several meals either for a family or an individual who is looking for a lot of bang for their buck. The need to reheat is common and should not necessarily be viewed as an inferior format, compared to hot meals, which are rarely optimal when it comes time to consume. For this category we are not recommending individual ingredient recipe kits similar to Blue Apron’s offering. The focus here should be prepared foods that require potentially light assembly and the reheating of separated components.
DINNER CLUB
Driving a fixed menu that rotates daily can allow for a more efficient approach to food and labor cost management then having to prepare a wide array of dishes that customers order online. Think of it as a pre-order prix-fixe menu. There is a lot of efficiency in this model and it is well worth considering.
PANTRY STAPLES
Pantry staples provide an opportunity for sellers to brand and distribute directly to customers and wholesale their own sauces, sub-recipes and dishes packaged in a way that allows them to either be shelf-stable or held cold to be consumed later. Some of these products are often suitable for common carrier delivery.
RECIPE CONTENT
Many sellers are taking a comprehensive approach to their meal kits as well as their social media marketing. Providing recipes and instructions both written and videos drives brand awareness and connection to guests. We’ve noticed the sellers that are continually generating content are having the best results during this crisis.
MENU ENGINEERING
When it comes to organizing menus in the new landscape of potentially softer sales and a smaller back of house staff, it’s so valuable to carefully assess the strength of each menu item, streamline unnecessary prep as much as possible, and minimize the chance of any potential food waste. This approach of evaluation should be applied not only to the made-to-order items, but also to the above mentioned meal kits. An open question for sellers will be what components of their menus will have the most impact. An example of this would be a comfort-food restaurant might want to lean into family-sized lasagna or meatloaf with a choice of separated sides because of how well those dishes travel, overall value and the ease of reheating.
FINAL THOUGHTS
We’ve taken a look at some successful strategies sellers are leveraging to adapt to this new landscape. By combining both online and offline sales, striving towards innovative distribution models, and providing a creative, well-engineered offering, sellers are paving the way towards viable business models that will help shape the future of food.
