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Why order ahead is not the killer digital wallet use case

May 14, 2014

The new Square Order app

The new Square Order app

With digital wallet adoption still not taking off, Square is the latest in a growing list of providers putting a bigger emphasis on order ahead functionality to attract consumers, but the strategy is likely to face its own set of challenges.

Digital wallet providers are betting that enabling consumers to place orders ahead of their arrival at a restaurant or other merchant location so it is ready when they arrive will drive adoption by adding value that is unique to mobile. However, with a small pool of appropriate merchants and inherent operational challenges, such functionality may not provide the boost wallet providers are hoping for.

“Order ahead is less of a slam dunk for all merchants as it will require some merchants to dramatically change their in-store operations, such as where will the order ahead items be gathered and how arriving customers quickly get retrieve them without queuing up with other walk-in customers,” said  Denée Carrington, senior analyst at Forrester Research, Cambridge, MA.

“Additionally, merchants whose product quality degrades quickly with time, e.g., hot beverages, will find it challenging to implement order ahead and maintain the product quality customers expect,” she said.

Square off
This week Square axed its mobile wallet because it never took off with merchants and is replacing it with Square Order, which enables users to order food ahead of their arrival.

The expectation is that by giving users a way to not have to wait on line to place an order, this will attract users to the app.

However, like with Square’s wallet before, one challenge will be getting merchants to sign on.

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Additionally, this strategy focuses on a limited group of merchants for whom order ahead would make sense.

PayPal has implemented order ahead capabilities with Jamba Juice and Chipotle while other quick-service restaurants such as Subway, Walmart to Go, Starbucks and others are currently testing or have already made such as service available via their mobile wallets.

Reducing friction
The idea is similar to order online and pick up in store, which hard goods retailers have seen some success with over the past few years.

“Many consumers have adopted the the buy online and pick-up in store use case for ecommerce and the ‘order ahead’ feature is akin to this for mobile commerce,” Ms. Carrington said. “In order to entice consumers and merchants to adopt digital wallets, wallet providers are seeking ways to reduce friction from the commerce experience and add value in ways that a card swipe cannot.”

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With order ahead, a customer places an order via a mobile app before arriving at a restaurant or café. Upon arrival, the order is supposed to be waiting to be picked up in a designated area so that customers can get in and out quickly without having to wait online.

In the example of Subway, the app also alerts a location when the customer is nearby so the order can be fresh upon arrival (see story).

Fresh use cases
However, creating a designated area, efficiently moving customers to this area and ensuring that orders are fresh are all challenges that merchants will need to overcome for order ahead to be effective.

Providing a good experience for customers could become particularly challenging during busy times.

“Managing how many orders you can handle at peak hours isn’t easy,” said Ivan Matkovic, CEO and founder of Spendgo, San Francisco. “It’s like asking your mini-cooper to do the same thing as your SUV. Someone just isn’t going to get a ride.”

“Use cases like loyalty program tracking, digital receipts, in-store mapping, recommendations, etc. are all value drivers,” he said.

“Mobile wallets are looking to improve the entire buying experience to convince consumers that they are worth it, given the lack of market penetration.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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