Domino’s Pizza now ‘fundamentally a digital business’

Domino’s Pizza is now “fundamentally a digital business,” its chief executive said today, as he unveiled a 9.2% rise in profits.

Bottom-line pre-tax profits at Domino’s Pizza, UK and Ireland, rose to £42.4m after a year in which more than half of its sales were made online. In the 53 weeks to December 30, 55.7% of its sales were made over the internet. The figure reached more than 60% by the fourth quarter of the year, and in recent weeks some UK stores have seen more than 80% of their delivered sales ordered online. “This sounds quite extraordinary,” said Domino’s chief executive Lance Batchelor, “but is becoming a regular feature.” Over the year, systems sales grew by 12.8% to £598.6m, with like-for-like sales up by 5% across 612 mature UK stores, and ecommerce sales up by 46.7% to £268.6m, from £183.1m last time.

“Going digital is a real advantage for Domino’s,” said Batchelor. Customers who ordered online, he said, recommended the company more often, earning a higher net promoter score, ordered more often and spent more. They were also customers who had a one-to-one relationship with Domino’s through email and online marketing. Short-term online-only deals helped to increase online sales during the year, with promotions targeted to individual customers or small segments through email and over the internet.

“Importantly,” said Batchelor, “a web transaction generates higher margins for our franchisees, because they do not need to incur labour costs to answer the phones. This has saved franchisees many millions of pounds which can be invested into new store openings, for example.” Some franchisees were reducing the number of phone lines into their stores as web orders increase, he said, while one store removed its phone number from menus with no detrimental effect on sales.

Mobile transactions grew by 195% during the year to reach 19.7% of all digital sales – up from 10.1% last time. “Mobile is set to grow rapidly as a proportion of sales; and we will stay ahead of the curve,” said Batchelor. “It is a real competitive advantage for Domino’s that we are fully accessible wherever and whenever our customers want to order a pizza.” Social media also grew. By the end of the year Domino’s UK and Ireland had 747,000 Facebook Fans in the UK and 68,000 on Twitter.

The master franchisee has also grown ecommerce internationally. Some 30.4% of sales in Ireland are now ecommerce sales, of which 19.6% are via mobile. However like-for-like sales were down by 0.2% – and 31% down on their 2007 peak, following the financial downturn.

The company now has 18 stores in Germany, and has now taken over 12 stores in Switzerland.

Batchelor said: “I am optimistic about the future and with the support of our franchisees we will continue to grow this outstanding business by focusing on opening new stores, testing new store formats and developing new products while always ensuring the customer is at the heart of everything we do.”