Wingstop (NASDAQ:WING) recently announced a one-of-a-kind ordering feature that will change the lives of couch potatoes forever. The company has integrated with video-game streaming service Twitch, a part of Amazon.com (NASDAQ:AMZN), to let gamers place a chicken wing order right on the site. No need to bother anymore with cumbersome phones that could be out of reach.
While this might sound gimmicky, don't miss the significance. The entertainment industry is changing, and there are real takeaways from this announcement.
The test drive
It started with a small experiment in August. Wingstop teamed up with Twitch and professional gamers to test the chicken wing extension. Viewers of the live stream selected which flavors of wings the gamers had to eat (to the dismay, I'm sure, of the gamers chosen to eat the spiciest varieties).
The collaboration then went a step further in November to allow any viewer to place an order through an extension in the live stream. The idea is that since everything is live, Wingstop doesn't want to take away from the experience. Rather, it wants to be a native part of it.
Why it matters
To me, this is part of a broader trend to respond to a "problem" created by online streaming companies like Netflix and Disney+. A problem, that is, if you are advertising a product. Traditional TV viewership is falling hard, and the decline is especially steep among younger generations. Merely paying for a TV ad doesn't ensure that you'll reach your intended audience. As eyeballs increasingly shift toward streaming content, companies like Wingstop have to invent ways to stay in front of consumers.
That's not to say that, in Wingstop's case, it's abandoning traditional TV advertising. On the contrary, in 2019 the company required franchised and company-owned restaurants to increase the amount paid into its ad fund. Each location is now required to contribute 4% of gross sales into the advertising pot. In its third-quarter 2019 earnings call, Wingstop's management said that this increased advertising budget allowed the company to run two 12-week national TV ads.
Clearly, Wingstop's strategy is to stay in front of both traditional TV viewers and online-streaming viewers. With its integration with Twitch, Wingstop is certainly taking a creative approach. It's an intriguing proactive move.
Things to watch
Wingstop has only been around as a brand for 25 years. And for the last 16 consecutive years, it has grown comparable-store sales. I'm not aware of another company in the restaurant industry with an active comps track record like this. The company obviously knows how to connect with consumers, and its integration with Twitch is just the latest proof. It's a big reason to like the business.
One broad question to ask is what other companies could look to integrate with Twitch in coming years? Fast-food restaurants are obvious candidates. But perhaps Amazon could look to begin suggesting items to live-stream viewers based on their browsing history. Another broad question is what other streaming services could begin integrating with brands to offer viewers the ability to buy right through the live stream?
Wingstop's ultimate goal is to be a top-10 global brand with over 6,000 locations -- up from 1,340 total locations today. To do that, it plans to continue opening new locations at a rate of over 10% annually. But it also wants to simultaneously grow comps in the mid single digits. Last quarter, comps were up over 12% -- way ahead of the goal -- so things look great right now. But any sudden slip in this number in coming quarters could be an indication that Wingstop is losing its edge of staying in front of the consumer in an ever-changing world.