Why Mobile Order And Pay Is Critical For McDonald’s Growth
More than a year after the national launch of its mobile app, McDonald’s (NYSE:MCD) will finally introduce mobile order and pay in the U.S. next year. Earlier in March this year, company management mentioned that it is working on a mobile ordering platform, likely to be piloted later in the year. It appears that McDonalds is finally ready to launch this product, much later compared to competitors. Starbucks, which pioneered this concept last year, now derives nearly a quarter of its sales from the mobile app. McDonald’s is working on a turnaround plan to improve revenues with initiatives such as the “All Day Breakfast” and healthier menu options. However, it is lagging behind others in terms of digital initiatives. While the company launched its mobile app in 2015, it did not have an ordering option or an integrated rewards program. Both of these features are likely to be rolled out next year. Mobile ordering is becoming the need of the hour and Business Insider Intelligence estimates that orders placed via smartphone will make up more than 10% of all quick service restaurant sales by 2020. Mobile ordering apps provide convenience to consumers, in addition to boosting customer loyalty. And they will be a critical growth factor in future. While McDonald’s is a late entrant in this space, we believe the launch of this app will be a major growth driver for the company in the long term.
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Mobile Ordering Can Drive Revenues, Customer Loyalty
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According to Business Insider Intelligence, mobile ordering of fast food is expected to be a $38 billion market by 2020. Consumers spend more on fast food online rather than when they order via the phone. Research suggests that the average pizza order is 18% greater online than on the phone. Starbucks has demonstrated that mobile ordering can also boost customer loyalty. The company has integrated its rewards program with mobile order and pay where customers can redeem rewards and offers while ordering via the mobile app. This strategy can attract more customers to its rewards program and increase the base of its loyal customers. While McDonald’s has delayed in launching its mobile ordering app, we believe the company can significantly benefit through an integrated rewards and mobile ordering system. As consumer expect quicker service and shorter waiting times, mobile ordering is an efficient solution for the fast food industry. Furthermore, the technology can be used to save favorite orders and promote offers, leading to a higher spending by the customer.
An increase in the average customer spend at a McDonald’s restaurant can impact its valuation positively.
With several quick service restaurants already allowing mobile ordering, customers are likely to expect this as a norm going forward. The absence of this feature could impact businesses negatively. McDonald’s delayed launch of the mobile ordering app makes it a necessary upgrade rather than an innovation to attract customers. However, in the long term, as consumers expect more conveniences and an easier payment methods, mobile order and pay will be critical to drive revenues for McDonald’s.
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