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Chipotle's Digital Sales Are Soaring. Here's Why.

By Daniel Sparks - Updated Jul 24, 2019 at 5:28PM

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Here are three simple but effective ways the fast-casual burrito chain is winning more digital business.

Shares of Chipotle Mexican Grill (CMG 1.70%) are hitting fresh all-time highs this week following the company's second-quarter update. Bullishness toward the stock comes as the company announced impressive 10% comparable-restaurant sales growth -- a figure that easily beat analysts' average forecast for 8.3% growth.

While some of the fast-casual burrito chain's recent comparable-restaurant store sales growth is attributable to revamped marketing efforts, much of this momentum can be credited to digital sales growth. Digital sales nearly doubled in Q2 compared to the year-ago quarter.

Here's a look at some of the ways Chipotle is winning customers with its fast-growing digital business.

Chipotle burrito, chips, and guacamole

Image source: Chipotle.

Chipotle has nearly 2,000 "second make" lines

When Chipotle recruited Brian Niccol early last year to lead its company's turnaround, the burrito chain had been experimenting with "second make" lines for several years. But it was under Niccol's leadership that the company refined the technology behind these lines and started rolling them out more rapidly.

The lines are simple. Each is a second in-store assembly line in which workers make burritos for online orders. But last summer these lines were in just 350 stores. By the end of 2018, however, they were in more than 1,000 restaurants, and now they are in nearly 2,000 locations or about 80% of Chipotle's total restaurants. 

Leveraging these second make lines to grow digital sales has played a key role in the company's accelerating comparable-store sales growth.

Digital pickup shelves are now in every relevant restaurant

Another key pillar of Chipotle's recent digital success is the addition of pickup shelves for digital orders. With these shelves, restaurant workers can simply set out prepaid digital orders for customers and delivery drivers, eliminating the need for them to talk to an employee when picking up orders.

Over the last two quarters, these shelves have gone from being in 1,000 locations to being in virtually all of Chipotle's stores, management said in the company's second-quarter earnings call.

Meet Chipotle Rewards

One of the company's more recent catalysts for digital sales is the launch of Chipotle Rewards, a new customer loyalty program launched in March. 

The company's digital ecosystem consists of the digital make lines as a foundation, with digital pickup shelves layered on top of these and the new loyalty program adding yet another layer, management explained during the second-quarter call.

In the company's second-quarter update, Chipotle said it has already garnered 5 million new Chipotle Rewards members.

Management insists its digital efforts are still in the early stages. Highlighting the potential for digital sales, some restaurants' digital sales have already surpassed 30% of their total sales -- well beyond the 18.2% of Chipotle's overall sales that digital now represents. If Chipotle can achieve this level of digital success at the majority of its locations, there's still lots of room to run.

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