Domino's online sales hit $1.1 billion in six months

Domino's online sales hit $1.1 billion in six months

Online sales continue to outstrip network revenue growth at Domino's Enterprises (ASX: DMP), with digital taking more than two-thirds of the total pie in the first half of FY20.

In its results today, the Brisbane-based pizza company reported an 18.8 per cent rise in online sales to $1.11 billion, representing 70 per cent of the $1.58 billion total.

This means the share of digital has risen five percentage points since this time last year, in what CEO and managing director Don Meij (pictured) says signifies as a change in convenience priorities from the old "analogue era".

"Domino's the brand is 60 years' old this year and it's been the delivery pioneer, so that's what we specialise in," Meij tells Business News Australia

"A lot of the things that were holding back consumers in the analogue world, we've now given digital solutions too. 

"For example, when does my pizza arrive? Well, you can now track it. What is on the menu? When you've got a digital platform it's fun - the majority of our customers customise their products."

The online category still includes third-party aggregators such as Uber and Menulog, but their percentage contribution is still quite low.

"For example in Australia it varies by state, but only two to three per cent comes from third parties," he says.

"In places like Brisbane we'll only get about one per cent of sales from an aggregator. In a place like Melbourne we get 3 per cent."

Amidst concerns over the gig economy and the conditions for delivery aggregator employees who are technically contractors, Meij points to a key distinction in Domino's approach to these companies.

"What's so critical about third parties is that we still do all of the delivery," says Meij. 

"At Domino's we want to make sure people are fully paid and remunerated - we believe in the contract model, we believe in safety, and we believe that fully uniformed drivers that are trained in customer service and experience, so we control the whole pipeline.

"We're obsessed with food safety so we want to manage the food on delivery."

Meij notes Uber Eats is the dominant player in Australia so it's the leading share of that 1 to 3 per cent, while its presence is growing in Europe and Japan.

"It's the leader in France for example," he says.

"The largest place for aggregators for us is Europe. You see numbers of 15 to 22 per cent depending on the country, but even then you've still got far more from our own platforms.

"For the Netherlands 85 per cent of our sales are digital and about 16 per cent of that comes from aggregators. So by in large, 69 per cent is still coming from digital platforms."

He says the Dutch have led the way in Domino's' aggregator mentality, as for a long time the Australian operations didn't even bother with them as its own platforms were so strong.

The positive results of the first half have continued into early 2020 with same-store sales growth up 6.3 per cent and 11 organic new stores opening up for trading, bolstering network sales by 10.7 per cent for the year to date.

The average number of stores per franchisee has also increased with the average franchisee now operating 2.2 stores. The highest rate on a country basis is France, where Domino's opened up its 400th store in the first half.

The company also opened its first store in Luxembourg during the period and its store numbers now sit at 2,607 in nine countries.

"The most sophisticated investors in this business are our franchise owners they're the ones who are closest to the earnings growth, so the health of our business is based on continuing to grow with existing people, making sure they're highly engaged," says Meij.

"One of the things about running a single Domino's store or two over time is it can become a little bit of a Groundhog Day.

"The interesting thing of building a network, keeping bigger teams and learning the skills of going from a one-store franchisee to a multi-unit franchisee, is it keeps high engagement and it's easier and better and stronger for us to operate as a business."

DMP shares were up 13.17 per cent at $65.03 at 2pm AEDT. 

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