Thursday, 22 November 2007

How Domino's is Cleaning up in the E-Commerce Market

Operating chief Chris Moore tells Charlotte Moore how digital initiatives are helping the pizza giant clean up .

Charlotte Moore, Computing Business 19 Oct 2006

The new Chief Executive Officer of Domino’s Pizza, Chris Moore, positively bristles with excitement when he thinks back to the launch of interactive TV in the autumn of 1999.
Domino’s was one of the first companies to capitalise on the technology. If their customers felt peckish while they watched The Simpsons, they could order a Pepperoni Passion using their remote control, without having to move from the sofa.
But Moore recognises the challenge to get the technology up and running was monumental. ‘We had seven weeks to write the software, install ISDN lines in every store and brief all the managers,’ he says.
‘We were told by Sky Digital that we would never be able to do it. But that kind of statement is like a red rag to a bull for us and we managed it with just two people.’
Domino’s decision to invest in interactive TV is typical of the company’s attitude to technology – it strives to be well ahead of its competition with any IT innovation.
Cutting-edge IT and pizza may seem an unlikely alliance, but Domino’s says that technology is the key to keeping customers and shareholders happy.
With the interactive TV system in place, Domino’s started to think about what it was going to do next. ‘We realised that the infrastructure we had built could take a lot more than just interactive TV orders,’ says Moore.
‘We had been thinking about going online for a while, but now we had the system we thought let’s sweat this asset,’ he says. Within three-and-a-half weeks, the firm had developed the online system.
The decision to enable customers to order over the internet has paid handsomely. At end of the last century it was uncertain whether interactive TV or broadband would be the more successful platform.
Until the arrival of broadband, interactive TV was the clear winner garnering 90 per cent of orders not made by phone or in store. But this has now been reversed.
‘Broadband has just murdered interactive TV,’ says Moore.
Internet takeoff
Online sales are now the fastest growing part of the business. At its recent interim results presentation, the firm said it expects 15 per cent of all sales to come from internet orders by the end of the year and one-fifth of all sales by the end of the decade.
Earlier this year, the company achieved a huge milestone when online sales topped £100,000 for the first time in one evening.
Canny investors have long known about Domino’s ability to generate healthy profits and a strong cash flow, but the growth of online sales is further improving the company’s financial health, says Moore.
The organisation has noticed that its customers tend to spend 25 per cent more when they order online than if they phone in their order to a store.
‘Around a third of our business happens between 5 and 9pm on Friday and Saturday nights,’ says Moore.
‘So if a customer calls in an order at that time, the manager already has 10 calls stacked up and does not have the time to talk about new products. But when a customer orders over the internet, he has the time to consider new offers and would not forget to order the garlic bread.’
For Domino’s target audience – single people or families with children – the use of the internet has become second nature. As a result, the online ordering system also works as a marketing device, helping to bring in new customers. ‘In excess of two-thirds of online customers came to Domino’s through the internet,’ says Moore.
Increasing numbers of people seem to prefer ordering online and this is boosting online sales. ‘We’re finding that people don’t communicate in the same way – they would far rather order online and not have to talk to anybody over the phone,’ says Jane Kimberlin, Domino’s IT director.
The higher spend per internet order and the number of new customers that it brings to the business is improving Domino’s profitability because the company does not have to dramatically increase its overheads to support additional business.
Domino’s is a franchise with each franchisee paying an upfront fee. The head office finds the property, builds the store and provides the training. The franchisee has to pay 5.5 per cent of its sales as royalties back to the company and contribute five per cent of sales to a national advertising budget.
As more orders are made online, the automation of orders means that each franchise store is likely to need fewer staff, which will improve their profitability.
And customers can register their details online, including their favourite order, reducing the amount of time it takes to make the order the next time.
The growth of the online business has another bonus – improving customer service. The automation means that customer details and orders are passed to the kitchen with minimal human error.
To the casual observer, Domino’s could afford to sit back and relax and allow the increasing use of the internet to boost its sales and profits over the next few years.
But a company that is committed to cutting-edge technology is not resting on its laurels. Moore is brimming with ideas: ‘We want customers to be able to use the internet to track where their pizza is, like Amazon allows you to track where your book order – is it in the kitchen, in the oven or on the delivery bike?’
In a few years he also would like every delivery driver equipped with a Bluetooth headset and a global positioning satellite to make deliveries faster and more efficient.
But the next big leap for the company is to make it easier for customers to order their pizza over their mobile phone.
Moore would not be drawn about how many additional sales he expects to generate from this platform. ‘I wouldn’t even put a number on it, but we know it will be big.’
Domino’s is the first pizza company to offer customers the ability to order a pizza over their mobile phones.
But clients need to download Reporo software from the web site onto their phones before they can text in their order.
This system is not as user friendly as the company would like – most people are reluctant to download software onto their phones – so Domino’s is planning a new, easier way to order a pizza by text, which will piggy-back the existing online system.
Moore says that Domino’s will take on board all the lessons it has learned from the online platform when developing the new text messaging ordering system.
The problem with registering as a customer by mobile phone is that it would take 10 or 11 text messages to register properly.
‘Intuitively, it has to be as few clicks as possible. We’ve found with our online system that the more processes and page changes it needs, the less likely people are to use the system,’ he says.
Rather than going through a laborious and frustrating registration process by text message, customers will instead register on the web site first.
Along with filling in their name and address, they will be able to build their preferred menus on line – for example, a pepperoni passion with a side order of potato wedges – and each will be assigned a code.
The customer can then text each individual code to a Domino’s number which will recall the exact composition of the order, plus all of the customers details and send this to the nearest Domino’s store.
The company decided to opt for this route after analysis of the company’s huge database of names, addresses and previous orders showed that a large percentage of its customers often make the same order again and again.
‘Every customer will have their own favourite pizza. Pepperoni passion may be our biggest selling pizza, but individuals will often customise – with extra jalapeno, for example,’ says Kimberlin.
And the system will require minimal investment for the company since it involves the addition of only a few extra pages to the web site.
Domino’s expects its new system to be up and running in the first few months of next year and, in the meantime, customers can find out more details through the company’s web site.

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