Thursday, May 23, 2019

Adapting to consumers

Get the Edge - Click here to view an archive of investment education, daily musings, book recommendations and more.

McDonald's reinventing the drive-thru (Link)
McDonald’s drive-thru times have steadily increased over the last 5 years. Back in 2012, the average customer spent 189 seconds in the drive-thru. In 2018 the average customer spent 273 seconds. Of the brands studied in 2018, the average was 234 seconds. Many blame the increase in times on technology advances and menu complexity.

In 2019 McDonald’s announced it was finally taking steps to improve drive-thru speed. To help with this effort McDonald’s announced it was spending $300 million to acquire Dynamic Yield. This startup based in Tel Aviv provides retailers/fast-food chains with algorithmically driven "decision logic" technology. When you add an item to an online shopping cart, it’s the tech that nudges you about what other customers bought as well. This was McDonald’s largest purchase since it acquired Boston Market in 1999.

The technology acquired by this acquisition will give McDonald’s the ability to create a more personalized experience by varying outdoor digital drive-thru menu displays to show food based on time of day, weather, current restaurant traffic, and trending menu items. It can instantly suggest and show additional products to a customer’s order base on their current selections. Chief executive officer Steve Easterbook said that McDonald’s has already begun rollout of the technology. It’s up and running in 700 drive-thrus across the U.S.

In regards to speed, the platform uses data collected based on current restaurant traffic and then starts suggesting items that make peak times easier on restaurant operations and crews.

How Daigous are still going strong in China (Link)
Daigous are China’s personal shoppers who specialize in importing lower-priced luxury goods from the West. Daigous, pronounced dye-go, literally means “representative purchasing” and refers to merchants who source and re-sell products even if they are not authorized distributors. These agents smuggle luxury goods into China by mislabeling or incorrectly claiming the actual value causing widespread cases of tax evasion. China’s government has had enough and enacted new laws in early 2019 that threaten to upend the entire Daigous business model.

After the new law was enacted, headlines claiming “Daigous business is dead” flooded Chinese media and social platforms. 

Despite a country-wide government crackdown and social media ban, the Daigous industry has remained curiously strong. Chinese customers still rely on Daigous based in Europe to get the latest, limited-edition products from top brands, since they still see on average 30% higher prices on those items in China. The Daigous market is far from dead, contrary to what Chinese and Western media had predicted.

How is Aldi upending American supermarkets (Link)
Running a supermarket in America has never been harder. Online shopping and home delivery are changing the way people buy their food. In this environment how is Aldi thriving and growing in America?

Aldi has more than 1,800 stores in 35 states and is on track to become America’s third largest supermarket chain behind Walmart and Kroger, with 2500 by 2022.

There secret is their ultra low prices. The company strips down the shopping experience passing along savings to its customers. For example, Aldi only stocks around 1,400 items compared to around 40,000 at traditional supermarkets. Aldi claims its prices are up to 50% cheaper than traditional supermarkets, and independent analysis by Wolfe Research shows its prices are around 15% cheaper than Walmart on a basket of the 40 most commonly bought supermarket goods.