The restaurant industry is more digital than ever, as evidenced by Olo’s first earnings release since going public in March. The ordering platform reported 125 percent year-over-year revenue growth, capturing consumers’ surging demand for increased digital ordering options. On a call with analysts Tuesday (May 11) discussing these results, Olo Founder and CEO Noah Glass revealed an even greater ambition: facilitating “not just … the 63 percent of transactions in the industry that are off-premise, but all 100 percent of the transactions in the industry.”
In a recent conversation with PYMNTS’ Karen Webster, Glass elaborated on this goal, discussing Olo’s desire to capture a greater share of consumers’ food spending, joining the grocery and restaurant purchasing experiences and develop an ultra-personalized platform.
“I’m really interested understanding who a consumer is across all the different brands that they order from within Olo, and if we could then pull in information about how they use grocery to enrich that profile,” said Glass. “We’re so close to taking consumer profile and making a personalized and radically better experience of commerce for them at the restaurants that are using the platform, based on what we know about consumers.”
Owning The Transaction
One way that Olo will develop this experience in years to come is by taking ownership of the payment process. On the earnings call, Glass mentioned that the company’s Olo Pay feature would likely be ready to go live in 2023, piquing the curiosity of those who had not heard Glass discuss the feature at Olo’s IPO roadshow. He explained to Webster, “[Olo Pay] is our effort to have an Olo payments offering as a component of our product modules, such that things like mobile wallet, things like chargeback and fraud protection, are built into the offering.”
This feature would replace Olo’s current system, guiding consumers to the restaurant’s existing credit card processor. Currently, Glass estimates that Olo is integrated with 18 or more credit card processors, adding that “it’s hard to really be nimble and innovative [times] 18 versus [times]1.”
Currently in its very preliminary stage, Olo Pay aims to give Olo access to more insights about its consumers and to give consumers “credentials that are platform-wide.” That would create an experience that is “more powerful in making the platform more valuable to the merchant.”
Re-Centering The Takeout Order
“It’s interesting to me that there’s so much focus on delivery and yet still for us and for the industry, the largest component of digital sales is takeout and not delivery,” reflected Glass, adding that, industry-wide, takeout orders outpace delivery two-to-one. These takeout orders are also more profitable for restaurants, circumventing the need to either support an in-house delivery fleet or divert a significant portion of the sale to a third-party delivery service. By guiding consumers to a restaurant’s takeout channel, Glass noted that a restaurant could “drive the consumer to effectively be their own delivery driver.”
As third-party aggregators, restaurants and consumers jockey to figure out who will bear the cost of delivery, Glass weighed in that “consumers are willing to pay for delivery.” He added, “we’ve seen that as the delivery fees go up, the delivery volume will go down, but that by having delivery as an option, basket conversion increases.”
Still, Glass noted, demand for delivery remains high enough that delivery-only restaurant brands will have a place in the post-vaccine-rollout future of the restaurant industry. In a previous conversation with Webster, Glass discussed the effectiveness of the restaurant model at the height of the pandemic. Now, he explained, “there’s enough demand from consumers for digital delivery that you can support one of these virtual brands … And what’s compelling to us about it is, it democratizes the ability to reach consumers by being able to launch … without having to go through all the investment that you used to have to.”
Achieving Digital Entirety
Another key function of these ghost kitchens, from Olo’s perspective, is that they allow the ordering platform to get closer to that goal of capturing a much greater percentage of total restaurant orders — in 2020, the company processed 500 million of the industry’s 60 billion transactions total.
“There’s so much for us to go and penetrate beyond where we are,” said Glass. “We’re not even at 1 percent, and these virtual brands that are inherently 100 percent digital have sped the path toward that ultimate ambition of touching every transaction, because they’re 100 percent digital, 100 percent delivery.”
Glass noted that “in thinking about [going from] digital primacy to digital entirety,” the company is looking to capitalize on consumers’ readiness to adopt in-restaurant QR code ordering to “go from that 63 percent of the [off-premise] restaurant transactions are addressable to now 100 percent of restaurant transactions are addressable.”
In today’s connected economy, consumers’ food spending behavior is becoming somewhat establishment-agnostic. As categories such as restaurant versus grocery become more fungible, Olo is excited about the opportunity to capture not only a greater share of restaurant orders but also a greater share of the overall food market.
“When you combine restaurants and grocery as a combined $1.6 trillion eats industry, it’s huge,” said Glass. “And there’s so much opportunity. It’s exciting that we are where we are, in the position that we’re in, to go and do interesting things that add value to merchants and to consumers.”
May 17, 2021 at 09:03AM