PIZZA PLUS: DOMINO'S HEAVY ON TECH TOPPING

INNOVATION and tradition is a difficult recipe to master, something Domino’s Pizza Enterprises (ASX: DMP) CEO and managing director Don Meij (pictured) is dedicated to perfecting.

He is aware that too much innovation can alienate the traditional customer, but isn’t afraid to squeeze out extra grease from the pizza business model where necessary.

“We would be spending more than the rest of the pizza industry combined on technology and innovation,” says Meij, the largest franchisee of the original Michigan-born company who has established Domino’s operations in Australia, New Zealand, Germany, Belgium, the Netherlands, and more recently France and Japan.

Meij mentions technology first when listing the company’s big four pillars, followed by product, store image and service. It’s a winning combination that has seen Domino’s share price in Australia surge 570 per cent in the past five years.

He gives credit to the 53-year-old American chain for being the first to market in many cases, but says his franchise has been the most innovative with technology over the past decade.

“Our local customers are getting the most advanced Domino’s experience in the world and perhaps in the whole fast-food industry when it comes to innovation – we track everything and I’m not aware of any other fast-food business outdoing us in that department,” says Meij.

Domino’s Australia has reworked the pizza business model and slathered the best bits across a new base; technology now forms the business foundation and the service is being laid on heavily – from the retailer, to the delivery person and the social media communication.

NEW TECHNOLOGY

This is Domino’s biggest technology year yet. A new project is in the pipeline which Meij says could be a “world first for a retailer”.

“Our biggest piece of technology will be launched to the public in August which we think will be first to market and a whole new way for consumers to engage with us and experience our brand.”

So far in 2014, Domino’s has updated its interactive visual pizza builder Pizza Chef for more devices, trialled an online-only ordering strategy, rolled out its hugely successful Offers app and partnered with PayPal as its first digital wallet. 

Offers was launched in April and has been number one in the free Food and Drink category ever since. It delivers store-specific deals to smart phones and was born out of people-powered market research that 80 per cent rely on vouchers to buy pizza.

However, the PayPal partnership builds and banks on the mobility trend even further. Meij says it is based on forecasts that mobility will overtake other purchase points in the next three years.

“Digital wallets are set to replace cash and credit card transactions in the future so it’s important our customers are offered this payment option,” says Meij.

“PayPal is one of the world’s major digital wallets and online payment processors and our major competitors do not currently offer this service online.”

SOCIAL

When you consider Domino’s hard focus on social trends, ‘People Powered Pizza’ becomes much more than a tagline.

In addition to market research, 30,000 employees worldwide and millions of consumers, Domino’s pays strict attention to its one million social media followers.

Meij says Domino’s is the largest ASX-listed company on social media, and while nearly half of the feedback is negative, this is more than welcome.

“The conversation is still happening even if you aren’t part of it, but it’s out there manifold in the community.

“New media means taking the good with the bad, which concerns some companies who view this as a challenge rather than opportunity.

“People think it’s more complex – but your business actually gets better the more you give it to your customer.”

Domino’s considers the underlying themes of customer feedback to improve the business and further capitalises on social media with a global team working around the clock and responding to every query within 30 minutes.

EFFICIENCY

The company is both concentrated on being the fastest in an industry where that’s generally all it’s about, while adding more value to the customer experience.

A focus on efficient operations has cut down delivery times by eight minutes over the past five years to an average of 24 minutes per order within Australia. This is a central figure being charted by Domino’s, with Meij suggesting developments in the year ahead are focused on pushing it down even further.

“An amazing new in-store system being launched next year will allow us to be more transparent to the customer about what they are seeing in the delivery process, which will also boost our efficiency,” says Meij.

Meij says the goal of making Domino’s the ultimate fast-food store, minus any negative associations, makes for a thriving organisational culture analogous to a “bullet train”.

“We talk about the bullet train here because there really is no time for office politics. There is no time for us to sit around and wonder what to do next – our biggest problem is literally getting things done in time.”

INSPIRATION

Taking into account the company’s fast pace, it’s no wonder Meij draws inspiration from tech giants such as Google, Netflix and Facebook.

“They are superb at painting pictures about where the world is going based on data and trend lines,” says Meij.

It wouldn’t be a stretch to say Meij belongs in Silicon Valley, but he maintains he “wouldn’t be in any industry besides retail”.

Retailing is his number one passion, pizza just the tasty topping. However, Meij isn’t inspired by any particular retailers and thinks a lot more could be done on the retail-front.

“Australian retailers are traditionally very poor at investing in technology. Being a high-volume transactional site with low involvement products, we are in a great position to help drive the transition to online purchase for both retailers and consumers.

“I wouldn’t be surprised if a lot of Australians purchased pizza as their first online order because of the low risk.”

CHALLENGES

Meij says people question how much innovation a pizza business can take, but insists Domino’s has a huge timeline. He doesn’t perceive any real threat in the movement towards a more health-conscious society, and rather frames it as an opportunity to attract more customers.

“We have our Good Choices Range and our core products are becoming more health-oriented too. Only six years ago our market was male-dominated, now it is a relatively even split. However, more interesting is that the fastest growth segment is women with children, testament to the product becoming so much healthier,” says Meij.

“The average pizza eater keeps changing – there are currently 28 sub-groups of target customers in the Domino’s world, which has evolved over the years from three.”

While meeting market needs may not be a challenge, Meij says rising labour and food costs are pushing profits down.

“Australia has experienced hyper cost growth in the last seven years. We have the highest labour rates out of all 75 Domino’s countries and we are paying record prices for food today.

“Rising commodity prices and increasing ingredient quality means we are paying more than double for most of our ingredients today than seven years ago, in some cases even four times the price.

“These are good and bad things, but we accept them nonetheless because they boost employee and customer satisfaction.”