There’s no doubt about it, competition in the Australian foodservice industry is fierce and getting fiercer.
Increasingly, QSR customers can be both demanding and fickle. Busy with work, family, and the obligations of daily life, they’re choosy with how they spend their discretionary dollars. Their expectations are high and their loyalty low. The moment their favourite outlet fails to perform, they’ll defect to another. Winning QSRs must therefore play smart - starting with a nuanced understanding of customer needs, preferences, and habits.
According to recent research, two-out-of-three Australian retail shoppers have left a restaurant and abandoned their purchase(s) due to long lines and wait times.1 However, 41% report that a short wait or no queuing options would encourage them to choose one restaurant over another. Among QSR customers specifically, 9% say that short queues would heighten their loyalty. Getting customers through the door is no longer enough. In today’s tight market, operators must also find innovative ways to keep them there once they arrive - and perhaps spend a little more while they do.
Also, diners across all channels are choosing to order their meals in digitally-enabled ways. Although this behaviour is primarily seen in the millennial segment, whose preferred payment methods are almost exclusively digital, this behaviour is rising among almost every demographic, according to NPD CREST® data.
Against the backdrop of low wage growth, “enticing consumers to direct their limited disposable dollars toward out-of-home meals is a very real challenge,” explains Seton Leung, head of Australia Foodservice at The NPD Group.
Through the end of September 2019, the QSR channel experienced 1% growth in traffic and a 2% increase in average spend, with dinner driving more than half (61%) of those gains.3 Additionally, both food delivery and pick-up are on the rise, especially among families and groups consisting of only adults. These upticks suggest they still enjoy treating themselves to meals they don’t need to prepare themselves. This is particularly good news for QSRs capable of leveraging convenience and affordability, while catering to their consumers’ needs and desires.
Forward-looking QSRs who are in-it-to-win-it will seize opportunities to capitalise on emerging trends and digital capabilities that are already sweeping the retail vertical. By pushing the boundaries of the customer experience, and enhancing their on- and off- premise interactions through technology-driven business intelligence, these QSRs can delight customers and foster loyalty - and translate both into increased traffic, spend, and profit.
NPD CREST® data has uncovered five key trends in today’s Australian QSR space. Some are consumer behaviours; some are emerging technologies. At the intersections of both lie significant opportunities for growth. In this paper, you’ll discover a strong case for adopting a comprehensive digital strategy in order to remain competitive in a tight market.
NPD CREST® reveals that the use of QSR self-service kiosks has grown by 53% in the last year.3 As a result of this momentum, kiosks are becoming a significant driver of QSR traffic, contributing to nearly 40% of growth during the same period.4 The inherent opportunities for QSRs, therefore, are considerable - especially given that not all consumers who order via a kiosk take their food away.
Primary research suggests that Australian QSRs investing in kiosk technology can reap tremendous gains. According to NPD CREST®, consumers most often cited convenience (as defined by “limited time for a meal” “fast service” and “need it now”), value (driven by “specific promotional offers”), and the user experience as key motivators for using a self-service kiosk.
Australian customers who use self-service kiosks most often:
While relatively new in Australia, the rapid adoption of self-service kiosks in US foodservice demonstrates the technology’s significant potential. 41% of QSRs in the US planned to invest in self-service kiosks, tablets, and tableside ordering capabilities last year. Further, 67% of consumers said they would place an order at a self-service kiosk within the next 12 months—an increase of 25%. Notably, the appeal of kiosks extends well beyond tech-savvy millennials: more than 25% of US consumers over the age of 65 have used a self-service kiosk within the last year.
QSRs looking to cash in on the kiosk revolution should consider how they contribute to the overall customer experience. Customising kiosks to offer the ability to personalise orders, pay with their preferred method, and offer add-ons with a simple tap will ensure happy customers - and happy customers return.
When looking to introduce kiosks, QSR operators should consider learnings from similar brands in the US which have found that:
Average order size increases by 21% (rising to 30% for the leading QSR burger chain). 5 Kiosks never fail to upsell, and customers who may otherwise feel self-conscious about adding items to their order - or increasing the size of them - need not worry about disapproval when ordering from a touch screen.
Individual transactions increase by at least $5. 6 Those add-on items mentioned above? They often come at a premium. But customers respond to relevant suggestions - such as adding avocado to their taco - and there’s less friction when they’re not interacting with a cashier or paying with cash.
Total order times decrease by nearly 40%. 7 Strategically placed kiosks mean that customers can more quickly and efficiently place and pay for their orders. Without the need for cash, QSRs can also redeploy staff toward higher-value tasks that increase ordering speed.
Increased housing costs, globalisation, and rapid technological advancement have fundamentally disrupted the concept of “free time” around the world. As a result, adults - both with and without children - have much less time to accomplish many more tasks.
“Overworked Australians, for whom time and money are at a premium, may view a seated restaurant meal as an indulgence,” says Leung. “At the same time, carving out precious minutes from an already-overscheduled day to shop for and prepare a home-cooked meal can seem overwhelming. The ability to harness the sweet spot between the two presents a real opportunity for operators. Busy people do still need to eat.”
NPD CREST® data underscores this fact. Driven largely by families, Australian consumers are ordering more pick-up and delivery. Within the last year, these two segments have experienced dynamic growth of 17% combined, with 21% deriving from delivery orders alone. The rising popularity of aggregators (e.g. Uber Eats and Menulog), as well as increased investment in off-premise ordering capabilities among QSRs, are contributing to this growth.
The ready availability of on-the-go meals can effectively address a significant time pressure for busy Australians. QSRs that are willing and able to invest in the infrastructure to support the latter, such as in-app ordering, stand to reap significant benefits.
Indeed, NPD CREST® data demonstrates that, while still in its infancy, digital ordering spend within QSR Australia has increased significantly during the past two years - growing from $1.1 billion in 2017 to $2.3 billion in 2019. This equates to an increase in traffic share from 3.1% to 6.4% across the same time period.
In order to assess this opportunity, visionary operators can extrapolate from the UK, where consumers increasingly prefer to dine off-premise. According to NPD CREST, convenience and affordability play into this trend, as do customer behaviours and technology. By the end of 2020, the number of Brits ordering their pick-up and delivery meals via digital means including online, in-app, and on-site kiosks will likely exceed one billion for the first time. In-app visits, especially, are forecast to leap by 88% during this same period.
Similarly, in the US, food service operators are turning to online and app-based services, including third-party delivery apps to increase restaurant customer visits and spending in the US. As a result, nearly six in ten digital orders now originate with a mobile app.
QSRs looking to gain in the delivery market should consider mobile apps as a means of building a base of loyal time-strapped customers. While initially costly, the return on investment will ensure that QSRs can drive revenue without increasing restaurant space and staff.
“Mobile apps are one area of tech that is second nature to many of us, especially the millennial generation, and this includes apps by the food industry,” says Leung. “Those within the industry need to consider their digital platforms going forward if they wish to stay competitive in the foodservice space and appeal to the new generation of consumers.”
Millennials prefer in-app payment methods, and they will continue to represent significant opportunities for QSRs.
Due to heavy investment into branded apps among leading global QSR pizza and burger operators, the use of mobile as a payment method is proportionally higher among these two categories than in others, including cafés and chicken chains. (According to NPD CREST, it’s more than three times higher for pizza).
“Pizza and burger chains fully understand the tremendous potential when consumers can order their meals, redeem special promotions, and pay via a dedicated app,” says Leung. “Any QSR operator can learn from this and leverage the same capabilities.”
source 9
Age
Roughly speaking, between 22-37
Motivations
Convenience
Fast Service
Value
Deals
Variety
Meals
The most commonly purchased meal among millennials is lunch, but their interest in weekday morning meals and afternoon snacks is growing
Payment methods
Debit Card
Especially among females and at lunch
In-app
Growing across dayparts, especially for off-premise occasions
$16 billion opportunity
Millennials are currently worth $16 billion across total foodservice in Australia – and they’re driving much of QSR growth. Better understanding them and their behaviour can drive your growth too.
QSRs looking to gain a share of the millennial wallet must prioritise convenience and context in the customer experience. Offering in-app ordering and payment coupled with pick-up and delivery options will drive customer retention and loyalty in this demographic.
While in-app payments comprise only 2% of the QSR channel currently, use is growing across all age groups - which makes a strong case for adoption on its own. The case further solidifies around millennials, who are currently worth $12 billion across QSR Australia and are driving much of the channel’s growth.
Millennials are extremely busy, more likely to dine alone than other demographics, often choose to eat at home when solo, and comprise the biggest segment of consumers who prefer digitally enabled ordering and payment. While their most commonly purchased meal (via all payment channels) is lunch, in-app payments among this group are growing across all timeframes.
Capturing the revenue opportunities inherent in these timeframes means capturing the attention of millennials. Coffee chains, for example, can capitalise on this demographic’s growing interest in weekday morning meals through a branded mobile app that fulfils their desire for convenience (ordering ahead), fast service (skipping the line), and deals. And almost any QSR can complement their on-premise meals with pick-up and delivery options supported by third-party aggregators - whose own ordering and payment apps provide the same capabilities and convenience consumers seek. While an overworked millennial is unlikely to sit in a restaurant on the way home from another long day, they are much more likely to purchase dinner from the train and have it waiting at the counter or delivered to their home.
Deal-based occasions are driving growth across the Australian QSR industry, increasing at a rate of 7% in the last 12 months according to NDP CREST®. This can be attributed to the rise of in-app and other mobile payment options, although it’s worthy to note that both methods have also boosted non deal-based occasions.
Delving deeper, CREST data further shows that consumers are redeeming deals at a much higher rate when making app-based purchases. Compared to total Australian foodservice traffic, deal-based occasions over-index at 120. In fact, 68% of APAC consumers report ordering a snack or meal because of an in-app deal. 10
Promotions are nothing new, and successful outlets have been using data to inform them for decades. But rapid technological advancement is challenging QSRs’ ability to fully understand their consumers. Simply assigning a customer number to collect point-of-sale data at the register, or offering a loyalty card that requires on-site redemption, no longer paints the fullest picture at a time when consumers increasingly are ordering and paying for meals off-site through a variety of digital means. Given recent growth in deal-based occasions, this can translate to considerable lost opportunity.
QSRs looking to use coupons and deals as a means to build their customer base should consider investing in a system that unifies payment data across channels and allows them to unlock additional value from customers.
The power of promotions are multiplied exponentially when paired with a unified commerce platform.
It also supports several key avenues for growth:
Increased spend. Apps make it easy to highlight relevant add-ons such as chips or a beverage. And, when QSRs offer special add-on pricing available only via the app, consumers tend to order them.
Retention and stewardship. NPD analysis shows that frequent restaurant visitors are most likely to be influenced to return through a digital service like an app. QSRs who can leverage in-depth customer insights to best appeal to these users can more effectively foster ongoing loyalty, which positively impacts the bottom line.
Beyond the convenience and speed that payment platforms can offer customers, they can also uncover useful insights that agile QSRs can leverage. By tying together an individual’s in-restaurant and online purchasing data, and storing that information in one place, these platforms help create a robust customer profile around which QSRs can build effective promotions. The ability to push these promotions out via app-based and other digital ordering methods, such as self-serve kiosks, increases the chances that consumers will respond.
In addition to removing the burdens of having to hire, train, and manage additional staff, third-party aggregators support in-app ordering and payment methods without operators having to invest in developing or maintaining their own. By posting menus and deals on aggregator platforms, QSRs can increase their visibility and geographic reach.
Currently, third-party aggregators comprise 2% of QSR traffic share in Australia (see figure to the right) - and, while small, this number is growing rapidly, increasing by 47% in the past 12 months. Traffic share for the most dominant presence in the market doubled in the last year. And, up-and-coming players are broadening opportunities for third-party collaboration.
Research reveals that 33% of people living in Australia’s capital cities - or 5.4 million consumers - regularly order meals through an aggregator. 14
That equates to 68 million orders each year, with an average annual spend of $1,590 per customer. 15
Recalling that in-app purchases and payments are growing among millennials, generation X, and those over 50 - together representing more than half of Australia’s population and nearly 70% of its workforce 16
- third-party aggregators can help outlets, without branded apps and/or delivery services, capture revenue they otherwise might lose.
Of course, investment in aggregator relationships isn’t insignificant. In some markets, aggregators charge a 30% commission on sales.
Increased partnerships with aggregators have shifted more of the digital footprint to third parties
Traffic share change vs year ago 13
While impacting the profit margin, aggregators can boost volumes by unlocking additional customers. QSRs looking to attract net new customers should consider aggregators as a means of marketing their offerings to new customers, allowing customers to “discover” the restaurant. QSRs concerned about the value proposition should consider the following:
As one leading QSR sandwich brand in the US is demonstrating, scalability applies to the big players, too. 17 By complementing its proprietary delivery services with third-party partnerships, the chain expects to realise “additive” incremental gains through fulfilling pent-up demand for its products among consumers who exclusively use aggregator apps.
Increasing popularity. Looking to the US aggregator apps comprise 40% of consumers’ 20 most used ones, according to NPD research. 18 Surveyed consumers cited “looking up items,” “paying for meals,” and “checking prices” as their primary drivers for using a third-party app versus a restaurant branded app.
Opportunity cost. As aggregators continue to permeate the market, outlets absent from leading platforms stand to lose business to competitors who appear on them.
Bob O’Brien, Global Senior Vice President, Foodservice at NPD
Intrigued by what these trends may mean for your future growth?
Harnessing the inherent opportunity of technology requires a comprehensive digital plan - backed by intentional implementation - that aligns with your strategic goals, budget, and operations.
While it may seem tempting to jump in and adopt the full complement of digital technology tomorrow, reality dictates a phased-in approach: one that supports market and consumer testing to ensure that each new digital sales channel performs as expected, and produces the desired result. For instance, if your presence on an aggregator platform fails to stimulate takeout orders, you’ll want to understand why before investing in and deploying a branded app.
Given that digital ordering necessitates payment capability, you also will need to rigorously evaluate potential payment platforms before rolling out your first - or next - digital channel. As you do so, look for a payments platform that is:
Ultimately, you should seek a payments partner that catalyses growth by providing the consumer intelligence you need to address your business goals.
Technology has changed everything from how products and services are sold and delivered, to how consumers behave and what they expect.
This on-demand economy has shifted the global commercial paradigm toward speed, efficiency, anxqd convenience, where immediate gratification is not only the outcome but also the goal.
In Australia, according to a recent report by 451 Research, 46% of consumers describe digital technology as essential to their daily lives - a statistic that rises to 60% among millennials. 21 Yet the QSR industry has been slow to respond with only 23% having deployed digital technologies that speed the customer journey. 22
Bucking this trend promises to be a sound business strategy - especially in light of the overall drivers of consumer behaviour in the Australian foodservice space, which were identified above. No matter the channel, QSRs who adopt a proven payments platform can:
Capture higher share of wallet from existing customers
Appeal to/capture growing demographic segments
Use deals and coupons to drive repeat revenue
Speed up the customer experience
Leverage aggregators to attract net-new customers
Capitalising on the opportunities can lead to positive growth in an increasingly competitive market.
Adyen (AMS: ADYEN) is the payments platform of choice for many of the world’s leading companies, providing a modern end-to-end infrastructure connecting directly to Visa, Mastercard, and consumers’ globally-preferred payment methods. Adyen delivers frictionless payments across online, mobile, and in-store channels. With offices across the world, Adyen serves customers including Facebook, Uber, Kogan.com, Aesop McDonalds, Joe & The Juice and wagamama.
The NPD Group offers data, industry expertise, and prescriptive analytics to help you grow your business in a changing world. With offices in 27 cities across the Americas, Europe, and Asia-Pacific, we help you measure, predict, and improve performance across all channels.
In partnership with Adyen, The NPD Group examined data compiled from over 60,000 consumer visits to commercial and non-commercial foodservice establishments in Australia through September 2019, as well as examples drawn from global markets. Analysis reveals that growth opportunities do exist - particularly among outlets best able to offer affordability and convenience. This white paper examines what the data uncovers about emerging trends in the Australian quick service restaurant space. It also reveals that QSRs willing to invest in digital technologies that enhance the customer experience stand to reap significant returns through reduced friction, increased efficiency, elevated sales, and heightened loyalty.
Download the full report
1 451 Research report commissioned by Adyen
2 451 Research report commissioned by Adyen
3 The NPD Group/CREST® Australia, QSR Traffic Share YE Sep 2019
4 The NPD Group/CREST® Australia, QSR Traffic Share YE Sep 2019
5 https://www.modernrestaurantmanagement.com/reasons-why-your-restaurant-needs-self-service-kiosks/
6 https://www.modernrestaurantmanagement.com/reasons-why-your-restaurant-needs-self-service-kiosks/
7 https://www.modernrestaurantmanagement.com/reasons-why-your-restaurant-needs-self-service-kiosks/
8 https://www.thenpdgroup.com.au/wps/portal/npd/au/news/press-releases/healthy-millennials-driving-change-in-australian-food-culture/
9 NPD Group/CREST®
10 From “The Digital Age of Foodservice in Asia Pacific,” January 2018: https://www.thenpdgroup.com.au/wps/portal/npd/au/news/latest-reports/the-digital-age-of-foodservice-in-asia-pacific/ (slide 6)
11 From https://www.mobilemarketer.com/news/mcdonalds-sees-daily-app-usage-jump-20-40/531176/
12 From https://www.retaildive.com/ex/mobilecommercedaily/mcdonalds-7m-app-downloads-highlights-effectiveness-of-welcome-incentives
13 NPD Group/CREST®
14 https://www.finder.com.au/australians-spend-1590-each-year-on-delivered-food
15 https://www.finder.com.au/australians-spend-1590-each-year-on-delivered-food
16 https://2qean3b1jjd1s87812ool5ji-wpengine.netdna-ssl.com/wp-content/uploads/Australia-Population-Map-Generational-Profile-2015_Infographic_McCrindle.pdf
17 https://www.restaurantdive.com/news/delivery-dilemma-are-in-house-innovations-or-third-party-aggregates-best/546840/
18 https://www.npd.com/wps/portal/npd/us/news/press-releases/2019/mobile-apps-now-represent-the-bulk-of-restaurant-digital-orders-and-restaurant-branded-apps-dominate/
19 http://www.tourism.australia.com/content/dam/assets/document/1/7/7/c/v/2015743.pdf
20 http://www.tourism.australia.com/en/markets-and-stats/tourism-statistics/the-economic-importance-of-tourism.html
21 McKee, Jordan. “Unified Commerce: Capitalising on Australia’s $92BN Retail Opportunity.” 451 Research, July 2019 (p.6).
22 McKee, Jordan. “Unified Commerce: Capitalising on Australia’s $92BN Retail Opportunity.” 451 Research, July 2019 (p.21).