Spot on, Professor. Really interesting to see how the pivot to operational efficiency drove Chipotle's profit margins—but marked a fundamental identity change, embracing the "fast food" role.
I came to a similar prediction about Starbucks recently, too: "They’ll fully cede the expensive, niche end of the market, but in retreating from having comfy cafes at which to sit and linger, they’ll have lower costs, and be able to operate and run in even smaller store footprints than currently." (https://yallstreet.substack.com/p/mermaid-misfiring)
Great post. More marketers should consider how operational efficiency can be a product feature. An old but great example is how Dell’s ability to fill made to order PCs within ~3 days in the 1990s let them compete with retail.
My only small quibble is that I’m not sure that the “third space” experience and operational efficiency are in conflict for Starbucks. The burden of filling mobile orders has really hurt the in-store experience. I suspect that they’ll figure out how to better meet the requirements of mobile order customers and better segregate the “factory” feel of that process from what it feels like in the store. I suspect that the in store experience is still critical to new customer acquisition and important to profitable growth.
Great post as always! I have a few questions for further consideration:
Price Trends: Could you elaborate on the average price increase for Chipotle bowls between 2018 and 2023? Is this the primary driver of margin growth? How does Chipotle's pricing strategy compare to industry standards?
Pricing Power: Does the price increase indicate Chipotle's unique ability to command higher prices, or was this capability already in place and simply exploited by Niccol?
Starbucks' Identity: Given Starbucks' recent internal discussions, is the company primarily an experience provider or a coffee provider? If it's the latter, how might this influence store formats and potentially impact the in-store experience? Should Starbucks consider differentiated pricing for drive-through and in-store coffee orders to maintain profitability?
Spot on, Professor. Really interesting to see how the pivot to operational efficiency drove Chipotle's profit margins—but marked a fundamental identity change, embracing the "fast food" role.
I came to a similar prediction about Starbucks recently, too: "They’ll fully cede the expensive, niche end of the market, but in retreating from having comfy cafes at which to sit and linger, they’ll have lower costs, and be able to operate and run in even smaller store footprints than currently." (https://yallstreet.substack.com/p/mermaid-misfiring)
Great post. More marketers should consider how operational efficiency can be a product feature. An old but great example is how Dell’s ability to fill made to order PCs within ~3 days in the 1990s let them compete with retail.
My only small quibble is that I’m not sure that the “third space” experience and operational efficiency are in conflict for Starbucks. The burden of filling mobile orders has really hurt the in-store experience. I suspect that they’ll figure out how to better meet the requirements of mobile order customers and better segregate the “factory” feel of that process from what it feels like in the store. I suspect that the in store experience is still critical to new customer acquisition and important to profitable growth.
Great post as always! I have a few questions for further consideration:
Price Trends: Could you elaborate on the average price increase for Chipotle bowls between 2018 and 2023? Is this the primary driver of margin growth? How does Chipotle's pricing strategy compare to industry standards?
Pricing Power: Does the price increase indicate Chipotle's unique ability to command higher prices, or was this capability already in place and simply exploited by Niccol?
Starbucks' Identity: Given Starbucks' recent internal discussions, is the company primarily an experience provider or a coffee provider? If it's the latter, how might this influence store formats and potentially impact the in-store experience? Should Starbucks consider differentiated pricing for drive-through and in-store coffee orders to maintain profitability?