This is the latest in Localogy’s Skate To Where the Puck is Going series. Running semi-weekly, it examines the moves and motivations of tech giants as leading indicators for where markets are moving. Check out the entire series here, and its origin here.
One of the ongoing trends we’re tracking is the growth of order-ahead functionality. It applies to everything from coffee to curbside pickup, and has been on a steady rise over the past decade. Covid-era dynamics have now accelerated it to minimize in-store contact. The question is if it sustains as a new consumer habit.
Pre-Covid drivers include consumers’ app savvy, millennial sensibilities, more QSR and retailer adoption, and smart logistics. The latter is where things get interesting because businesses that lean into this trend can work towards streamlined operations and yield optimization (sort of similar to cloud kitchens).
Those factors and micro-economic perks aren’t new concepts, but order-ahead’s relevance and demand signals are taking new forms in the Covid-Era. We’re witnessing forced adoption of order-ahead (along with several other technologies) that could inflect its adoption in positive and permanent ways.
This was evident in Starbucks’ recent move to close 400 locations and replace many of them with order-only stores. As we wrote at the time, Starbucks was the pre-pandemic poster child for order-ahead functionality; and is now really leaning into the model. We expect the trend to continue for the coffee giant.
Caffeinated Network Effect
And as it often goes, there will be a trickle-down effect to the mid-market and SMB segments of the coffee world (and other verticals). For all these reasons, we’ve been saying that SMB-focused tech providers should take note, as there will be an opportunity to fulfill the growing demand for order-ahead systems.
One company is already jumping on that opportunity. Joe Coffee just received $1.3 million to scale up its coffee-focused order-ahead technology, or what I’m calling coffee-as-a-service. The company works with smaller independent shops to power order-ahead logistics including ordering, payments and fulfillment.
Joe Coffee naturally started in Seattle where it’s been building a mobile ordering network for independent coffee shops. This was simply to form a critical mass of stores on its network that would make the app worth downloading as a complete pan-Seattle experience — a sort of supply-side network effect.
From the user perspective, the Joe Coffee app and web interface offer the ability to order from all the shops in its network. It also has a loyalty program that works across its network of shops. So you can redeem points at one of the Joe Coffee network shops, even if you earned those points at others.
Name of the Game
Through this process, Joe Coffee also got good at the SMB-facing side of things. Beyond expediting orders and processing payments, the company provides store signage to promote the app. It also provides the barista-facing app that helps them fulfill orders and see analytics. For all this, it takes 9 percent per order.
Back to the point about the timing being right for order-ahead capability, Joe Coffee’s revenue performance validates that. According to Techcrunch, the company’s sales volume has grown 20x since March. And since it went nationwide in January, it’s now up to 1,000 independent coffee shops.
Continuing to scale that up is now the name of the game, and the reason for funding. 1000 new shops is great but it will need several more if it’s to achieve that same network effect across several U.S. cities. If the order-ahead trend continues to grow at the same pace, momentum will be on its side.
Also on its side is SMB receptivity. Beyond Joe Coffee’s adoption rate, we know that SMBs now have high receptivity to new technologies — e-commerce specifically. The latest wave of Localogy’s Modern Commerce Monitor validates that. All of these signals could indicate an opportunity gap for order-ahead SMB tech.