“I believe food is for eCommerce 2.0 what books were for eCommerce 1.0,” Olo CEO and Founder Noah Glass told Karen Webster in a conversation shortly after Olo’s partnership with Amazon Restaurants was announced in the news.
The announcement — that Amazon will be integrating Olo’s latest product, Olo Rails, into its food delivery service — sent shockwaves through the food delivery ecosystem. Grubhub’s stock was off nearly 6 percent when the news broke.
Olo will make it possible for Amazon Restaurants to integrate with the point-of-sale (POS) systems of the restaurants that are part of Olo’s platform. That single integration will simplify the management of digital orders for each restaurant (no more five tablets for five different delivery aggregators), giving Amazon Restaurants, Amazon Prime Members (via Prime Now) and Amazon Pay access to Olo’s 200 high-profile enterprise restaurant partners, such as Chipotle, Shake Shack, Five Guys and Denny’s — and their customers.
Behind the headlines, though, the Amazon/Olo partnership shines a bright new light on the role of mobile and digital in resetting consumer expectations across all facets of retail, the reshaping of those retail ecosystems that will follow and the importance of scale in delivering those new, mobile-powered retail experiences.
“I think that what is interesting about food is that it doesn’t fit the two-day shipping template,” Glass told Webster, adding that hot food is impractical within a two-hour shipping window, much less a two-day window. Glass said that when it comes to food, it’s an hour or nothing, which points to service providers with scale, the staff and the logistics expertise — like Amazon or Uber — to deliver that last mile. It’s why, Glass said, that it made perfect sense for Amazon to put its Olo-powered restaurant delivery capability inside its Prime Now offering.
In 2017, that seems a very astute observation, particularly for the CEO of a firm that serves 200 of the biggest enterprise restaurant chains in the nation — and especially now that everyone and their chef wants to add mobile order ahead (or delivery on demand) to their menus.
But Glass made that prescient observation some time ago — 12 years ago, to be exact — when the biggest enabling tool of eCommerce 2.0, the smartphone, was a full two years away from even being announced, and the App Store that gave birth to eCommerce 2.0 wouldn’t follow until a year after that.
But back in 2005, Glass had two things going for him: He had a problem he wanted to solve, and he had an unusual passion for using technology to solve problems.
In the Beginning…
Noah Glass just wanted a cup of coffee.
Specifically, a cup of coffee from the cafe on the first floor of his Manhattan apartment building that he could pick up on his way out the door to work in the morning. The problem was that everyone else in the entire city of New York also wanted a cup of coffee at that same time. And while some of us might have waited in line, gotten up a little earlier to beat the rush, brewed coffee at home or found another place to buy that cuppa joe, Glass decided to invent mobile order ahead instead.
“Here we were, in 2005, living in a world of location-enabled and aware gadgets that I thought could be turned into payments and commerce remote controls,” Glass said. “When I wanted coffee in 2003 and 2004, my computer wasn’t the right device because it wasn’t location-aware yet — and was not exactly portable — but the smartphone was … it the potential to trigger my order ahead of my arrival at the coffee shop so that I could order it ahead and walk in to get it, ready and fresh.”
The problem was that in 2005, the “right” device didn’t exist yet. Webster asked if he happened to have been eavesdropping on Steve Jobs’ phone calls and knew that the iPhone was coming. No, Glass chuckled, it was much different than that.
Glass thought personal digital assistants (PDAs) and Palm Pilots were super cool and had potential. And people carried them around. PDAs and Palm Pilots and phones connected to the internet (remember WAP?) were in consumers’ hands and pockets, and Glass imagined that at some point, soon, someone would build an even more advanced Palm Pilot for the future and the operating system to power a number of super cool use cases.
Good bet, as it turns out.
Also a good bet, was the decision to make food a part of an app that was initially designed for coffee at Olo’s first beta test at a New Haven, Connecticut, coffee shop in 2005.
“We were thinking about coffee when we launched,” Glass said, adding that it would be the paninis that would become the runaway hit — and more or less ignite mobile order ahead for them.
Olo’s app, called GoMobo, was for the earliest of earliest adopters. Consumers had to go online, create an account, link their phone through a text message to that account and then link a credit card to that account.
That was just for starters. The consumer then needed to create a menu configuration of the things they might like to order. The app would text those options back to the account holder. Text 1 for coffee; 2 for coffee and a panini, for instance. Glass said that the paninis were an afterthought, thrown in at the last minute, but became the runaway hit.
Only in retrospect did Glass and his team understand why.
The coffee shop was near Yale University’s campus. Hungry students on their way to class liked to stop to get food. Even if they arrived and there was no line, the sandwich itself took time to cook. Trading off a clunky text-to-order process was worth it if a student could schedule a pick-up time, walk in, grab their lunch and keep walking to class.
“That’s when we knew we struck an opportunity much bigger than just coffee,” Glass told Webster.
An Order by any Other Name
Making it easy and efficient for restaurants to facilitate order-ahead solutions has always been at the core of Olo’s mission. Like any startup, it’s had its share of pivots along the way.
For example, the company has not always been called Olo.
For a while, the service was called Mobo, or GoMobo. But Glass said that restaurants in the early days weren’t looking for a one-off mobile solution. What they really wanted was an online ordering solution.
Thus, Olo — ala online ordering — was born, Glass joked, so long ago that online was still two words.
And so was Glass’ conviction that a mobile operating system and smart devices that would support applications like mobile order ahead was in the offing, simply by observing how many consumers were willing and happy to use a clunky texting interface mixed with online interactions to make ordering ahead possible.
“I knew the consumer was there,” Glass said, “but even I was surprised that [mobile ordering] was adopted as quickly as it has been or that use cases like Uber would become so prominently understood and used by consumers.”
What he knew in his gut was that the consumer would want to use mobile devices as a commerce remote control — and that soon, restaurants would recognize that too and want to take advantage.
The Other Customer Group
Glass also said that getting a better handle on merchant demand — and moving away from a B2C model to a B2B(2C) model — was Olo’s next big evolution as a platform.
That happened, Glass said, much to their surprise.
After a press appearance in the early days on “Good Morning America,” Glass and his team were contacted by Dallas-based upscale burger chain MOOYAH, who wanted to white label their technology and integrate it into their digital platform and offer order ahead.
Glass noted to MOOYAH’s owner that promoting its offer to Dallas consumers wasn’t on its radar screen as yet. MOOYAH didn’t care; they had customers. What they wanted was the capacity to take orders ahead of the consumer’s arrival.
And so it began.
That, Glass said, was 2007, when the not-so-perfect storm of Bear Stearns and the financial crisis and investors pulling money off the table snowballed. Glass told Webster that Olo was one of thousands of companies that started to wonder what might happen to them if the venture funding tap turned completely dry.
Then, Glass told Webster that he and his team looked at their business and had their Eureka moment.
“We said — wow — look what’s happened at MOOYAH. We have no pricey consumer acquisition costs. We are simply giving a restaurant our product so that they can use it to build their own experiences and acquire the consumer, Glass explained, adding that sounded like a pretty good business model to him.
The end consumer, Glass said, didn’t know Olo. Building a consumer brand was time-consuming and costly. At the time — 2007 — the notion of mobile order ahead and even online ordering was also a service that wasn’t quite as mainstream as it now, so it required a lot of education to get a consumer on board, and then to use the service regularly.
But Glass said what consumers knew and liked were their favorite restaurants — and there was a lot that Olo could do to help those restaurant brands build even better customer experiences and strengthen the relationships with those customers.
That was the moment Olo said goodbye to its B2C model, and hello to its B2B(2C) model. Olo rebuilt its platform — with a big assist from Braintree — to make it possible for restaurant brands to participate in this new digital/mobile order innovation across the entire buying process, without having to alter the merchant’s normal transaction flow.
Shortly after that, Glass said, Olo landed Five Guys — the fastest-growing brand in the country, that had grown from four to 500 stores in a couple of years. From there, Glass said, it’s been a wild ride; from moving into premium ice cream, diners (yes, they own that late-night food slot and are perfect mobile order-ahead candidates) and the 200 or so other “iconic brands” that are connected to its platform.
The Modern Olo
Glass said that one of the biggest areas of innovation at Olo that enabled the Amazon announcement was the launch of Olo Rails — a single API that any delivery provider can integrate to and connect directly with Olo’s restaurant POS integrations.
Olo Rails gives restaurants the chance to get rid of the array of tablets that each connect to a delivery aggregator. It allows all delivery channels to plug into a single Olo API that pushes the data directly from the consumer through the POS to the kitchen.
In the early days of delivery, Glass noted, couriers would just wait in line for the orders, which didn’t necessarily affect the restaurant, but drastically cut down on the efficiency of delivery service productivity. The tablet solutions — where delivery orders come through on a separate tablet — helped delivery service providers be more efficient in timing deliveries, but they created a series of logistical problems for the restaurant around transcribing information from one stream to another and keeping menu data up to date on a series of different delivery marketplaces.
By making it possible for those aggregators to plug into the POS, taking point-of-sale data on the menu and putting it into a consumable form for customers — with all the correct rules and content, like pictures and text — keeps everything organized and controlled for the consumer and the restaurant.
“It helps avoid the nightmare of having an order call for putting vanilla ice cream on a cheeseburger,” Glass joked, explaining that an online ordering system doesn’t know how to make those adjustments unless there are hard-coded rules.
Amazon, he said, is Olo Rails’ first delivery marketplace partner, and comes with some very strong and powerful advantages.
“The customer already has a Prime relationship. They don’t even [need to] stop … to add their payment credentials; they are ready to go.”
Amazon also has a lot of other goodies at its disposal, Glass explained — voice ordering through its suite of Alexa-enabled products, a five percent cash back rate for users of its Visa Prime Credit card and the ability to bring the consumer all sorts of other things while the driver drops off their dinner. Need napkins? Paper plates so they don’t have to wash dishes afterwards?
The behavior of consumers is changing, Glass and Webster mused, and mobile order ahead and delivery is clearly something that appeals to consumers. That doesn’t mean, however, that delivery services as a standalone business is a sustainable force in commerce.
“I’ve been bearish on delivery companies for a long time,” Glass noted of firms that only deliver meals. “I think it is hard to stack up that one-use case against firms like Uber and Amazon that are thinking about — and already doing — last-mile logistics for all of eCommerce 2.0 and have other assets to leverage and monetize.”
Restaurants are special in that they are uniquely unafraid of Amazon in retail, he explained, because Amazon is unlikely to attempt to cook all of America’s food as well as deliver it. Whole Foods has kitchens, Glass noted, but restaurants aren’t threatened so much as they are looking forward to the opportunity to boost their sales with a new and popular channel to place their foodstuffs in the hands of customers.
“The restaurant has been a very stagnant market over the last few quarters, and mobile order ahead and delivery has become something that has become a real game-changer.”
But the bigger, and more noticeable, change is coming, he said, which is something that is obvious to them as they are talking to more and more firms that aren’t restaurants at all.
Glass said that the irony about the announcement with Amazon is that it has caused merchants outside restaurants to ring them up, wanting help with creating a more efficient online ordering and pick up in-store model that is linked to existing POS systems.
Right now, Glass said, they apologize a lot and explain they only do food — and not even all the food they want to do. According to NPD, 38 percent of food bought is consumed at the restaurant and 62 percent is consumed off-premise, 39 percent is takeout, 20 percent is drive-thru and 3 percent is delivery.
There’s plenty of room to grow.
But, he noted, Olo is already doing experiments in isolated retail pockets and in places where, as there was 12 years ago, a problem or something missing. Recently, Glass said, Olo has been working with medical marijuana to overcome the payment-on-delivery issue, since digital payment for a Schedule 1 narcotic can’t be arranged online.
In 12 years of solving a problem, Glass said the same lesson keeps coming up. Consumers want the solutions, and they can’t be persuaded they don’t want what they want. In human history, no one has ever wanted to wait in a line. In 2005, Glass saw a way to use a phone as a remote control to make it possible to never stand in one again.
Now, everyone wants to use that remote control, and Olo has a platform that helps restaurants deliver what those consumers want now — and is prepared for the onslaught of demand that looks like it might be coming.
These days, Glass said it pains him to say that’s only restaurants with 40 or more locations, given the demand for their platform. Even that amount, he explained, represents a 400,000 unit in a 600,000 thousand-unit market, where the clear majority of restaurants are single or a small number of locations, is still just “a drop in the [restaurant] bucket.”
But stay tuned, Glass said. There’s certainly more to come for smaller merchants, because entrepreneurial CEOs only live with broken hearts about unaddressed market segments for so long.
“We are living on the cusp of a very new era,” Glass said. “Restaurants are changing their physical layouts and rethinking both the interior and exterior. In the future, we aren’t really picking up our food; autonomous vehicles are doing it. So, your Tesla is going to the restaurant — or Uber is sending cars to deliver from point A to point B. We are now living in the Jetsons [Age], and I’m not joking.”
Coming from a guy who saw mobile order and delivery more than a decade ago, we believe him.