Fast food firms get sales boost from online orders
Fast food firms report getting about 30-40% of orders online, majority of them through mobile apps
New Delhi: Q: What’s driving sales of fast food companies in India?
A: Smartphones.
With Indian consumers increasingly shopping online, fast food companies with home delivery facilities report getting about 30-40% of their orders online, with the majority of them coming from mobile applications.
During January-March, Domino’s Pizza recorded 23% of its total orders coming from its mobile application, up from 16% a year ago, according to an investor presentation by Jubilant Foodworks Ltd, that runs Domino’s Pizza chain in India. Online orders accounted for 29% of Domino’s total orders in India in January-March, up from 18% in the same quarter a year ago, the note added.
India is the fastest growing market for Domino’s Pizza. The smartphone app has seen more than 2.6 million downloads so far.
The promoters of HT Media Ltd, which publishes Mint, and Jubilant FoodWorks are closely related. There are no promoter cross-holdings.
Jubilant declined to comment on its online orders.
Over 34,000 people order Domino’s Pizza online every day in India on an average, which is about a third of the total number of pizzas Domino’s delivers daily. About 200 million people use smartphones and are connected to data networks in India.
The trend is similar for other fast food chains. “About 40% of our total delivery orders come online. A good part of this was from the mobile devices, essentially through the McDelivery App. And, it is growing fast," said Amit Jatia, vice-chairman, Hardcastle Restaurants Pvt. Ltd that runs the McDonald’s chain across western and southern parts of India. The number was just about 5-7% at the end of 2013.
“About 30-35% of Pizza Hut’s delivery orders come online at present. It has been growing every quarter. Over a period, online would become much stronger for Pizza Hut," said Virag Joshi, president and CEO of Devyani International Ltd, that runs Pizza Hut, KFC and Costa Coffee chains in India. For KFC, online is estimated at about a fourth of its total delivery orders.
According to retail industry analyst Rachna Nath, it’s the sheer convenience that is driving online ordering numbers. Even though the trend is popular in the metros, smaller towns are fast catching up. “While double income families resort to home delivery options during week days, they prefer eating out on weekends," Nath said.
It’s interesting to note why home-delivery food ordering is moving away from telephone calls to online and mobile apps. It is definitely seen as a more convenient way to order food by consumers who are not worried about miscommunication possible in telephone calls.
Besides, online payments are simpler. Consumers can choose to pay on delivery, or pay with credit cards, or debit cards or Internet banking. Mobile wallet facilities are also available. Some consumers prefer paying by cards or use mobile wallets for most of the purchases, as these usually offer additional discounts or reward bonuses.
“With smartphones, one can be online any time from anywhere and order as they wish," said Nath. According to a PwC’s global survey, the top two reasons for buying online is convenience and cost. Often, companies offer special discounts and other benefits for customer acquisition if orders are made online.
Gaurav Tandon, a former AT Kearney analyst who recently founded Yummade, a packaged food company that delivers preservatives-free fresh foods, said online food ordering is projected to cross phone ordering in the US, and this would happen in India as well in the near future. “Convenience is key, and smartphones are making things easier with personalisation. However, over a period of time, people will shift to aggregators or marketplace apps, as they offer more options," he said.
In the US, according to a May 2015 report by US-based market research firm NPD, online ordering has doubled from around 403 million in 2010 to 904 million by May 2015.
In India, the growth is likely to be faster. There will be about 651 million smartphone users in India by 2019, up from 140 million in 2014, and there will be about 18.2 million tablet users by 2019, a huge jump from just about 2 million in 2014, US-based technology firm Cisco projected in its research report Visual Networking Index published in February this year.
The rapid rise in online ordering is beneficial to the food chains, too. It reduces their costs by about half, essentially, as they reduce the dependence on call centres.
They can also reach out to many more people at a given time. According to estimates by Wazir Advisors, online ordering can bring down cost of companies by up to 40-50%.
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