Pizza chain Domino’s says 40% of its sales come from online, either through its website or smartphone apps, highlighting how more franchising stores are beginning to utilise online sales without cannibalising the sale of its individual stores.
The announcement, made at the Sydney CeBIT conference yesterday, comes as Harvey Norman explores a similar venture.
Forrester research analyst Steven Noble says creating digital networks shouldn’t necessarily become a stumbling block for franchises.
“The very nature of the franchise business model is that every time you make a decision about some form of initial investment, whether it’s ordering or advertising, the question is: does that fairly or unfairly shift the balance between franchises and franchisees?”
“Now, of course it can be complex, in that you have complicated arrangements with different geographies and so on. But this shouldn’t make it inherently impossible; it just makes one more conversation to have.”
Domino’s online ordering works with the customer submitting an order through a central digital system, which is then sent out to the user’s nearest store. The product is delivered from there.
Harvey Norman chief executive Gerry Harvey says his upcoming online venture will work roughly in the same way, with products to be ordered through a central system and then shipped out from the user’s nearest location. Revenue splits are currently being negotiated.
Domino’s Australia and New Zealand chief executive Don Meij said yesterday the company is now recording nearly half of its sales online.
“Customisation means the customer is spending more because they are adding ingredients,” Meij said. “We also get a higher portion of loyalty and, in our business where loyalty is difficult, to be able to get that is fantastic,” he said, according to the Australian Financial Review.
“Mobile commerce is our future,” he said, referencing internal figures from last year that showed Domino’s recorded $1 million in sales six weeks after it launched an iPhone app. An Android app is now set to be launched.
At the same time, Domino’s is expanding its physical network of stores. According to its half-year presentation, it started 2010 with 786 stores and now has 843, and announced a $10.2 million half-year net profit after tax, up 16.9% on the previous corresponding period.
Sam Yip, Telsyte senior research manager, says the growth of online and smartphone sales could be largely due to the growth of coupon and discount codes.
“I think there seems to be a disparity between the in-store price of a pizza and the price you can get online with a discount code. Sometimes the differences can be quite substantial.”
“I think that as consumers begin to use social networking much more this will become more accessible, not just on desktops but on mobiles as well. The key challenge for a company like Domino’s and any other store is maintaining a healthy disparity between online and in-store.”
“Consumers are learning that they can get an aggressive discount by buying online versus in-store, and I think the value between both of those channels need to be articulated. Right now, there is no difference apart from price.”
Noble says Domino’s is making a smart choice by betting on the mobile market, saying mobile should be “the fabric that weaves together all channels”.
“The use of mobile should be even more obvious than before. You need to bring all those channels together, and it’s wise for a company operating in this space to take an early claim in the use of mobile services.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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