Retail Anthropology - The Science of Sales

Link: http://www.thestreet.com/story/10646834/1/mcdonalds-to-offer-free-wi-fi-access.html?cm_ven=GOOGLEFI

McDonald's has offered 2 hours of WiFi in its restaurants for a $2.95 charge for a while now and while I don't know how successful it's been for them now they're taking it to the next level by dropping the $2.95 charge.  But....is that really a good idea?

McDonald's CIO David Grooms says it's part of their efforts "to become a destination".  I'd argue that McDonald's is ALREADY something of a destination, but one of the fundamental components of McDonald's is not to sit around on the hard plastic chairs watching unhealthy people scarf down two more Big Macs.  It's speed.  You can get in, get predictable food that tastes o.k., spend very little money, not worry about your kids annoying the other patrons, and get out. Fast.

How much money does Microsoft really make when you buy something off the Dollar Menu?  Well...less than a dollar per item, you can be sure of that.  So how do they make money?  Volume.  "Billions and Billions Served".  You can make a lot of money, 72 cents at a time, when you serve hundreds of those items an hour.   So how does it serve McDonald's interests to have all of their tables filled with folks on laptops, already satieted with their $1 double-cheeseburger and enjoying free refills on their $1 Coke?

One key factor in restaurants is called "Turnover".  How quickly you turn the tables over - get one set of patrons fed and happy and then out of the seats so you can put a fresh set of patrons in the seats.  Nothing slows down turnover quite like giving the patrons a reason to stay in their seats longer. If that reason is because they're enjoying a cup of $4 coffee or $20 wine from your bar, then that's good for restaurants.  If that reason is because they are hanging out on Facebook for free, then that would be bad.

Various articles about this move cite McDonald's competition with Starbucks.  But there's a big difference between the two.  Starbucks revenue model is based on selling you a $7 coffee, and then tempting you with all sorts of pricey add-ons.  Look around a Starbucks sometime at all of the ways you can spend your money while you're there.  Coffee mugs, aprons, coffee makers, even CDs of the music they're playing in the restaurant; and all of them premium-priced.  What does McDonald's sell?  Fast food.  Emphasis on the FAST.

As a techie I'm glad to know there is now (or will be in January) a new destination I can pull up to in order to get my laptop online when I'm on the road.  As a business guy though it doesn't make sense to me that a business that relies upon volume to make their profits would offer a service that almost by design fills their tables with people who aren't spending more money.

We'll see how it works out, but I think it's an odd decision.

You can reach Ben M. Schorr at bens@rolandschorr.com or by phone at 808-782-6306.