Is Chipotle’s Digital Restaurant the New Look of Retail?

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Is Chipotle’s Digital Restaurant the New Look of Retail?

By Jamie Grill-Goodman - 11/16/2020
"This consumer behavior will continue to evolve, and retailers of all kinds need to be ready." -Raj De Datta, CEO and co-founder of Bloomreach.

Chipotle Mexican Grill opened its first-ever digital-only restaurant last weekend, but it doesn’t want customers to eat there.

The Chipotle Digital Kitchen in Highland Falls, NY, is open for pickup and delivery only. The concept isn’t new of course, Starbucks launched its Starbucks Pickup store in Manhattan in 2019, which allows customers to order their drinks through the Starbucks mobile app and then pick them up at the store. Starbucks announced in June it will close up to 400 company-operated traditional cafes in North America over the next 18 months and open a “greater number” of new stores in different locations with innovative store formats. The coffee retailer said at the time it has committed to the expansion of the Starbucks Pickup store format.

Also in 2019, Walmart piloted its first Pickup Point concept store. The 40,000-square-foot Walmart Pickup Point in Lincolnwood, IL, set out to fulfill online orders through pickup or delivery options, but shoppers could not shop inside the building.  

"Chipotle’s first digital-only restaurant is being driven by the explosion of online orders in fast-casual and quick-service restaurants,” Will Eadie, chief revenue officer at WorkJam, tells RIS. As online orders become a larger portion of chains’ sales, these digital-only locations will likely increase in the US. The concept of what a restaurant looks like is fundamentally transforming, and digital-only restaurants are set to play a major role.”

Chipotle says the Digital Kitchen concept is focused on accelerating its digital business in non-traditional locations or “more urban areas that wouldn't support a full-size restaurant.”

"The Digital Kitchen incorporates innovative features that will complement our rapidly growing digital business, while delivering a convenient and frictionless experience for our guests," said Curt Garner, chief technology officer of Chipotle. "With digital sales tripling year over year last quarter, consumers are demanding more digital access than ever before so we're constantly exploring new ways to enhance the experience for our guests."

The location does not include a dining room or front service line and customers must order in advance via Chipotle.com, the Chipotle app or third-party delivery partners. Orders are then picked up from a lobby that is designed to include all of the sounds, smells and kitchen views of a traditional Chipotle restaurant. The Digital Kitchen will also service large catering orders available for pickup in a separate lobby with its own dedicated entry.

“In order to adapt to this new business model, organizations need to develop a new set of frontline operations,” echoes Eadie. “The key will be to deploy digital workplace technology down to the frontlines on mobile devices or on-premise kiosks to enable real-time task management, cross-location scheduling, up-to-date communication, and access to secure documents.”

Chipotle said its new design concepts and menu innovation are envisioned at the retailer’s Cultivate Center in Irvine, CA. The new 22,000-square-foot facility center is located minutes from Chipotle's corporate headquarters.

"Chipotle is making a market-defining step by quickly and dynamically adapting to key customer preferences and changes,” Christian Selchau-Hansen, CEO and co-founder at Formation.ai tells RIS. “These store layout and service modifications will in turn motivate additional positive changes in their customers' behaviors, and in how they engage with the brand. Like Chipotle, leaders who act on data insights will be the ones who promote more customer lifetime value and will incite industry-wide change.

“From making ordering easier, to reducing lines, everything will get better. What will make this possible is making the app experience truly personal at every touchpoint. Whether it’s ordering your favorite burrito or receiving a highly relevant ‘personal’ offer, customers need to feel this level of personalization from start to end."

As U.S. click-and-collect e-commerce sales are expected to grow 60% this year, with sales reaching $58.52 billion, it’s likely that more retailers may consider launching fulfillment only locations.

“Consumers no longer distinguish between online and in-person experiences, and Chipotle’s first digital-only establishment is a stellar example of a trend we’ll see more often in retail, grocery and fast casual dining,” Raj De Datta, CEO and co-founder of Bloomreach, tells RIS.

“As consumers seek out products and services that are solution-oriented and convenient, storefronts and dining centers will have no choice but to cater to logistical functionality. In other words, storefronts will become pickup and distribution centers, and restaurants will be pickup points and kitchens.

“Retailers that are able to adopt this same digital-first attitude will find growth and continued relevance. Just this year we’ve seen tremendous success with buy-online-pickup-in-store (BOPIS). This consumer behavior will continue to evolve, and retailers of all kinds need to be ready."