Hurt yet again by aggressive third-party marketing and discounting from third-party aggregators, Domino's is deploying several delivery strategies — from GPS tracking to a bike delivery pilot — to increase efficiency, reduce costs and improve customer service.
"We continue to navigate through headwinds related to aggressive activity from third-party aggregators," CEO Rich Allison said during the company's Q2 2019 earnings call Tuesday morning. "I do not expect this activity to ease in the near term."
Those headwinds translated into a slowing same-store sales growth, down to 3% during the quarter compared to 6.9% during the same quarter a year ago.
But the pizza chain has numerous plans to stay competitive, most revolving around its continued investment in technology to improve operations and profitability for its franchisees, Allison said.
This fall, Domino's will trial autonomous delivery with Nuro in Houston to help couriers with high volume. It also will continue its multi-market testing of its voice ordering system, dubbed DOM, to process phone orders. It's currently available in at least 40 corporate stores, helping navigate customers away from time-consuming phone orders to an online system.
During the earnings call, Allison also discussed the pizza chain's newest tactic, a pilot in several markets using bikes and e-bikes for delivery. Franchisees are currently hiring delivery bikers in Washington, D.C., in several Texas cities and Seattle, while corporate stores in Miami Beach are hiring e-bikers, according to its website. While most of Domino's U.S. pizza delivery is by car, that’s not how the company does business elsewhere in the world, Allison said.
"Not only [are bikes] a lower cost way to deliver food but also it opens up an additional workforce to us," he said. "Not everyone has an automobile."
Bikes in urban markets could be particularly beneficial since drivers often have issues with parking, making delivery jobs more accessible to additional people, Jeremy Scott, senior research analyst at Mizuho, told Restaurant Dive.
With all the new strategies, what may have the greatest impact, however, is Domino's GPS tracking, which the company began testing in a handful of markets this past spring. The technology provides an estimated delivery time and sends an SMS notification when an order is two minutes away. Allison revealed that after a successful pilot, Domino's will roll it out system-wide by the end of the year.
GPS tracking provides information to franchisees and restaurant operators to help them better manage delivery operations, Allison said. Scott added that it brings a level of transparency most customers are now accustomed to.
"This is the one big tech deficiency that Domino's has versus third-party operators that is going to dramatically improve the delivery experience for them," Scott said.
For several years, Domino's has offered a five-point tracker that allows customers to track their order, get an estimated delivery time and text messages once the order is out for delivery, but it never indicated the driver's journey in real time.
Domino’s isn't alone in this effort. Its competitors in the pizza segment also track orders, but GPS driver tracking is now becoming an expectation because third-party apps provide the feature. Uber Eats has offered driver tracking from day one using Uber's logistics platform, while DoorDash implemented it in 2017 and Grubhub added it seven years ago. Uber Eats also recently revamped its website to include a five-point tracker along with its existing driver tracking tool.
"[GPS tracking] is the one big tech deficiency that Domino's has versus third-party operators that is going to dramatically improve the delivery experience for them."
Jeremy Scott
Senior research analyst, Mizuho
Domino's larger GPS tracking rollout will also have immediate competition from a traditional rival. Yesterday, Papa John's debuted its own partnership with Drivosity to add GPS tracking at 1,000 locations nationwide. The service monitors what, when and how drivers complete their routes, as well as how safely they are driving. With Papa John's rolling out this feature, Domino's tech dominance could potentially wane depending on how quickly the Drivosity partnership is adopted system-wide.
Regardless of how much GPS tracking could elevate Domino's operations, it follows a long company history of tech innovation, from being a leader in autonomous delivery and voice ordering to implementing a plethora of ways to order such as by text, Tweet or Slack to name a few.
So far, Domino’s focus on new technology has shown positive results, growing at a faster rate than its two closest competitors. Papa John's faced declining same store sales for the last several quarters, and Pizza Hut has reported low single-digit growth. But the big question is whether it's enough. Same-store sales growth at Domino's reached its lowest level in over a decade, even as its tech investments increased, suggesting that more will need to be done to maintain an edge over the growing threats from third-party operators.
