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Restaurants to contend with the practicalities of shifting online and reopening safely

The restaurant sector was among the first to be affected by the COVID-19 lockdown and recovery is not yet in sight. While UK consumer spending intention remains low, the online shift helped the sector persevere. Even as the industry reopens and sales pick up, with indoor dining restrictions and social distancing measures, businesses may have to continue to depend on online and delivery options.
 

Consumer intention to spend on restaurants and takeout food remains subdued

UK consumers’ intention to spend on discretionary categories such as restaurants or takeout food remains low. In mid-April the restaurant and takeout food category saw a negative net spending intent of -50%, which moved upward to -10% in mid-July. The upward movement was initially driven by the shift towards takeaway and delivery services, then by the reopening of restaurants and pubs in July.


Shift towards online spending

Compared to essential items such as groceries, consumer’s intention to purchase restaurant food via an online channel remain. The shift to online was accelerated by restaurant dining venue closures and lockdown measures where, businesses have had to quickly roll out delivery options and improve their presence online. Though with restaurants now open, online spending saw a drop. From a peak of 56% in April, only 35% of the consumers surveyed in July are likely to buy from a restaurant, using online channels over the next four weeks. However, keeping in mind that safety concerns remain high, the digital channel may continue to play a key role for businesses.


The delivery experience to take priority

Consumers planning to purchase takeout food and drinks online and collect in-store have seen a rise. 39% of consumers are likely are to buy takeout online and pick them up in-store in the next four weeks, up from 28% in the first wave. The key drivers for takeaway food being collected are safety and cost, it is also considered to be less stressful.

Restaurants have had to rely heavily upon third-party delivery apps, websites and social media to communicate with customers, as a result making easy digital access and personalized communication critical. These findings indicate that as consumers’ preferences change, there is an opportunity for businesses to improve the consumer experience, by investing in safer and simpler delivery processes.


Reopening challenges concentrated on safety and profitability

With only 34% of UK respondents feeling safe going to a restaurant or bar and staying in a hotel. Safety is of the utmost priority and restaurants will be expected to focus their efforts on enabling a contactless digital experience and ensuring social distancing. Some business have already implemented apps to manage table bookings, register for contact tracing, view and order from a digital menu and enable mobile based payment, thereby limiting interaction between staff and customers.

Consumers’ economic fears are also likely to compound safety concerns, with 37% of UK consumers stating that they are concerned about losing their jobs. Rise in unemployment is likely to drive price sensitivity, with consumers seeking more affordable options. While, some loyal customers will come back in a show of support, it is expected that a greater number may not, at least initially.

Businesses that offer off-premise services, for example delivery or pickup are likely to rebound faster, compared to those that depend heavily or entirely on in-dining services. Some operators have switched to a multi-channel sales strategy which include a redesign of the menu to ensure more transport-friendly, locally sourced items and an internal or external delivery strategy. Even quick service restaurants, that had evolved key aspects of the customer experience to digital, even before the pandemic began, need to consider their business model and operations. For these operators the focus is likely is on an improved supply chain, delivery and mobile ordering experience.

Businesses recognize that their crew being essential employees, are concerned about themselves and their families’ health. Only 47% of UK respondents said they feel it is safe, to return to their workplace. Operators have reduced menu options and limited in-person interaction, to allow their crew to focus on tackling key challenges like safety, sanitation, delivery and profit margins.


The future of restaurants is anything but business as usual

With venues restricted by the need to observe social-distancing measures such as imposing limits on the number of diners, maintaining profitability will be a challenge. Consumers will probably remain cautious about their discretionary spending. As a result, the leisure sector may need to prepare for a longer recovery time, compared to other industries.

To support the rebound of the industry, the government has launched a few initiatives to encourage consumer spending. VAT for the tourism and hospitality sectors including restaurants will be cut from 20% to just 5% till January 2021. While it is encouraging it may result in some confusion, because, some companies do not intend to pass this price cut on to customers, hoping to help boost their cash flow instead. The ‘Eat Out to Help Out’ scheme that offer diners a 50% discount on food at restaurant and bars, on Monday to Wednesday for the month of August, may boost sales. However, businesses that depend on workers coming into the office, may not necessarily gain from this scheme. The schemes regarding tax cuts, employment schemes and subsidies could trigger a sharper recovery in the sector, at least in the short term.

Customers are likely to be more wary and demanding, not just limited to the price, but in regard to their perception of safety and cleanliness from both operators and their suppliers. Restaurant businesses may face an increased level of scrutiny on the food quality, hygiene and the entire supply chain. The online shift could potentially increase the influence of consumer generated reviews, making it imperative for restaurants to respond quickly to any concerns on quality and safety.

Restaurant businesses across segments may need to execute and operate differently going forward. Future restaurant design concepts are likely to reduce the dining room footprint, with further investments into cloud kitchens, contactless technology, and delivery and pick-up window options. The industry, which spent years trying to be more efficient and to improve speed-of-service, may need to shift its focus on safety, cleanliness, and the overall customer experience.

For more specific consumer behaviour insight from our global survey, please access our Global hub.

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