Pandemic pizza – COVID-19 takeaways from Domino's as digital transformation work pays off


Pandemic pizza – COVID-19 takeaways from Domino’s as digital transformation work pays off
Stuart Lauchlan
Mon, 04/27/2020 – 00:37

Summary:
Domino’s has invested heavily in digital transformation for many years and it’s paying back in the current COVID-19 crisis.
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Takeaway and delivery food services are among the few businesses to see an uptick in activity during the current pandemic crisis, but that’s not to say that leaders in this space haven’t had to make their own COVID-19-related adjustments. As Ritch Allison, CEO of pizza giant Domino’s, puts it:

We’ve taken 60 years worth of standard operating procedures and we’ve had to rewrite a good many of them in just the last six weeks.

This change comes on top of a pre-existing shifts in the nature of the Quick Service Restaurant (QSR) – AKA fast food – market, with the rise of third party digital delivery platforms and aggregators, such as Deliveroo and Uber Eats, he adds:

The reality is that the world is changing very rapidly…The restaurant industry is facing an existential crisis and no one knows how many restaurants will survive or what form the industry will take as this crisis eventually abates. We also don’t know how consumer behaviors and purchasing patterns may evolve during and then after this COVID-19 crisis.

To keep on top of changes in consumer demand, there’s an ongoing program of analytics underway, says Allison:

Across delivery and carryout service methods, dayparts days of the week, the US will continue to be impacted by many factors such as shelter and place orders, business and school closings and event cancellations, which vary in magnitude across the cities and towns in the U.S. that we serve. Across our international business, the unique circumstances in a number of markets have necessitated the temporary closing of stores and in some cases, entire markets have temporarily closed for varying periods of time. We are still assessing this literally day by day.

There are some consistent patterns emerging, such as higher sales growth during the week than on the weekends due to locked-down families being at home during the week, Daytime sales are up, while late night business is down significantly – the post-evening out impulse buy pizza craving is on hold for now.  In addition, people are ordering extra food so that there are leftovers for picking on the next day.

Digital engagement 

One trend that has seen an acceleration in recent weeks is a shift towards online ordering and fulfilment. Currently around 75% of transactions with consumers is coming via digital routes, topping 80% in one week last month. That’s up on the 70% digital sales that was the high last year.

That said, fewer than 20 Domino’s stores in the US are currently shuttered, although operating practices have had to be rethought. Allison explains:

We’ve moved to a 100% contactless delivery model across the country. We have made our contactless, drive-up/carry out technology available to all US stores. We have temporarily banned customers from sitting and eating in our stores. We’re asking our customers to practice social distancing when they visit us to pick up their carryout orders.  Contactless delivery is the only type of delivery that we do in the US. We’ve actually made it mandatory across the country.

Longer term, Allison doesn’t see a return to ‘business as normal’ when it comes to delivery:

I do think that even at a point if we pull back on that and no longer mandate [contactless delivery], we are still going to offer it to the customer, because I think for some extended period of time, there is going to be some portion of the customer base that is going to want that contactless experience in delivery and/or in the carryout side of the business.

Domino’s has a healthy track record of digital and omni-channel investment and this has put it in a strong position, argues Allison:

I’m incredibly proud of our technology and innovation teams who have rapidly moved to bring that contactless experience to the customers’ handheld device or however they choose to order from us. And that includes some rapid innovation also to make tipping of our delivery experts easier and more prominent in the ordering experience, because the last thing that we want to see come out of this is any of our delivery experts to see a decline in income as customers move away from cash transactions and more toward digital and either credit or debit card transactions.

All of this does of course require stock to be available in stores in their role as digital fulfilment hubs. This has been a success story, says Allison:

All of our US supply chain centers also remain open and are fully operational. Through the remarkable efforts of our supply chain team, we successfully opened our newest supply chain center in Columbia, South Carolina on March 29. We’re working very closely with our suppliers to maintain a safe and stable flow of product into our stores.

I’m so proud of our supply chain team. They’ve done it a just a tremendous job of continuing our core operations, while also responding to this crisis in new ways. They put significant effort into sourcing masks, gloves, thermometers, contactless delivery supplies and cleaning supplies at a time when these items are under just incredible demand pressures. Our supply chain centers, corporate stores and franchisees are also hiring and have been looking to add more than 10,000 employees across the US.

After lockdown

Looking ahead to life after lockdown, Allison is as uncertain as anyone else about the long-term impact of the virus on the restaurant industry:

When we take a look across the restaurant landscape, there are a lot of restaurants out there that are not open right now. And we don’t know how many of those honestly are temporary and how many of those will turn into permanent closures…as someone has been in the restaurant industry for a long time and someone who loves to eat out, I sure hope independents to survive because I think all of us want to be able to go to an independent restaurant. We want to be able to go to a Domino’s Pizza [and] we want to be able to go to an independent restaurant as well.

From Domino’s point of view, there’s more certainty, he adds:

We do believe that we are a pretty resilient brand. In a time like this, I think the positioning that we have as delivery and carryout player has certainly helped us in the early part of this crisis. And I think will continue to help us because I don’t think consumers are going to snap right back to the old patterns and behaviors. The capabilities that we’re building in contactless delivery and contactless carry-out I think are going to continue to be important for many months to come, when we think about how this ultimately evolves. As we think about the capabilities that we’re putting in place today, it’s not just to be competitive in the next couple of months. It really is to set ourselves up in what may end up being the new normal in our industry.

One pre-CIVD-19 decision that Allison is glad Domino’s took is to reject the advances of the third party aggregators and delivery services. This time last year he declared:

I don’t see any need for us to go on to these third-party platforms. We have an incredibly strong digital channel in our business. We’re far and away the digital leader in pizza. So it’s just not clear to me why I would want to give up our franchisees margin or give up the data in our business to some third-party, who will ultimately use it against us.

Twelve months on, nothing has changed:

in the current environment we’re operating in, I am so glad that we are not on these aggregator platforms as Domino’s. When I think about what matters to our customers, the trust and knowing how that food, where it was prepared and who delivered it to them. It certainly comforts me needs to know that it is our uniformed and trained Domino’s delivery experts that are bringing the food to the door in a time like this. I’m also very glad that we’ve made the decision over time to continue to own that customer relationship on the front end, particularly now that we’re talking about a run rate of 75% plus in digital. We think even more than ever that it is critical for us to continue to own that digital relationship with the customer as well.

That said, he concedes those aggregators are likely to be beneficiaries of the ongoing crisis:

In the current environment with virtually all restaurants closed to dine in, there are lots and lots of customers that are trying delivery for the first time, and many of them through the aggregators. So this is going to be a very dynamic environment as we look over the months ahead.

Image credit – via Domino’s


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