The Domino effect

The Domino effect Scott Oelkers, President and CEO, Domino’s Pizza Japan, Inc

TOKYO —

Last Sept 30, to mark its 25th anniversary in Japan, Domino’s Pizza launched an English website (http://www.dominos.jp/eng/) on which you can order everything from pizzas and pasta to hot subs and side dishes. As an extra bonus, the website featured a number of special offers and set menus exclusive to the English website, including more freedom in your choice of pizza and favorite toppings.

The campaign has proven extremely popular with the foreign community and the website continues to do well, says Scott K Oelkers, president and CEO of Domino’s Pizza Japan. In fact, over 45% of the company’s total sales in Japan come from online business (Japanese and English), plus smartphone apps.

Although Domino’s has been in Japan for more than 25 years, it changed hands last year. A U.S. private equity firm, Bain Capital, acquired the Japan franchisee Higa Industries from Duskin Co, Daiwa SMBC Capital and Ernest Higa. Oelkers, who was the CEO of a company called PizzaVest from 1992 until 2007—PizzaVest is the master franchisee of Domino’s Pizza in Taiwan—was initially brought in to provide interim leadership for Japan, but that changed into a more permanent role.

Oelkers spends about two weeks each month in Dallas and two weeks in Japan, working with his team to drive the Domino’s marketing campaign. In one such innovative project last December, Domino’s offered a 2.5 million yen part-time job just for an hour’s worth of work.

Japan Today editor Chris Betros visits Oelkers at the Domino’s Pizza Japan headquarters in Chiyoda Ward to hear more about the business.

Where are you from?

I was born in Minneapolis. I first left the U.S. in 1979 to go to Taiwan. Prior to my career with Domino’s, I worked briefly for the Korean government and for a short time at Itochu.

How big a market is Japan for Domino’s?

Japan is a top 10 market outside the U.S. for Domino’s. It was the stepping stone for Domino’s into Asia, which now is a very large business. Japan was really a test market for the master franchise concept where more latitude was given as far as menu items and other parts of the operation are concerned. That sort of latitude isn’t given to U.S. franchisees. The success here has spread around the world. There are now almost as many stores outside the U.S. as inside the U.S.

Since Bain acquired Domino’s Japan, how have sales been?

Sales have gone up due to a consistent effort on operations and creative marketing.

What is your marketing strategy?

We do a lot of niche marketing. That includes print advertising, menu distribution, direct mail and newspaper inserts.

What about that campaign last December for the job that paid 2.5 million yen an hour?

We never want to be boring. We have fun with our campaigns. So last December, we ran a promotional campaign seeking to hire someone and pay them 2.5 million yen for a one-hour job. It was our 25th anniversary and we had 25 surprises; that was one of them. It generated a lot of attention in the press across the globe. We were in the International Herald Tribune, Wall Street Journal, USA Today, and in multiple languages. I was actually in Dallas the day that it hit the headlines. There were U.S. citizens calling U.S. corporate headquarters, wanting to know how to apply for this $30,000-an-hour job. The receptionist was transferring the calls to the HR department who had no idea what was going on. I got a call at my home in Dallas asking what was going on. It created a frenzy. We got calls from Ukraine, South America, everywhere. I think in all, there were about 11,000 applicants.

And did you hire someone?

Yes, a panel of celebrity judges hired a woman and in the one hour, she delivered pizzas to children on Oshima Island. They had never had pizza before.

How has the English website been doing?

We launched that last Sept 30, and I believe it is one of the few English-language websites in Japan where you can order food and have it delivered to your house. It has been very popular among the foreign community, although it is still not very well known yet. Our penetration rate is still not broad.

After the earthquake, there was a drop in sales but it is starting to rebound. One thing about the English website is that it is not a translation of our Japanese website. If you look at the two sites, they are quite different; even the promotional offers are different. The English website is targeted more toward the types of products and price points that would be attractive to foreigners.

How popular have the smartphone apps been?

We have had over 200,000 downloads and done over 400 million yen in sales on the iPhone and Android apps in the last 12 months. It got a lot of coverage in the press because of its GPS ordering system. I can be sitting in Ueno Park and order a pizza and it will be delivered within 5 meters of where I am sitting. We currently do not have plans to make the iPhone application in English, but it is something we will be exploring in the future.

It sounds like your online business is increasing.

Yes, currently, over 45% of our sales come from cyberworld—online business plus smartphone apps. It is the highest in the world for Domino’s franchisees.

How do your products differ from other markets?

Size is one area. Our pizzas here are 14-inch and 10-inch. In Australia, it is about 12 inches; they only sell one size there. In the U.S., Domino’s sells 15-inch and 12-inch pizzas.

Another is our menu lineup. We have a much broader menu here, probably 3 or 4 times as many types of pizzas and three times as many toppings on our main lines, if you include sauces. The cheeses are different, too. We have double deckers with camembert mille-feuille and other fillings. You can’t buy these anywhere but Japan.

How often do you launch new products?

Usually every quarter. In January, we launched a Buon Appetito line, which is a thin crisp product. It was our No. 1 new product launch in the last five years. For spring, we have a new quattro with mango and guacamole.

I notice there are often some very unusual pizzas and toppings in Japan?

We have a product development team and they look at food trends in the country and on the restaurant scene to see what people are eating. They consider if those trends are translatable to a pizza topping, and whether we can alter it or use it in our ovens. Then we test it with consumers before launch.

How competitive are your prices?

If you look at our full menu pricing, we are comparable across the board with our competitors. Obviously, there are all kinds of promotions and discounting going on.

Is the 30-minute delivery time a big deal in Japan?

It’s part of our marketing campaign, but safety is our No. 1 priority. Domino’s Pizza Japan is a founding member of the safe driving association and we continue to be active in promoting safe driving in the fast food delivery business. Providing quick service to customers is very important and right now, we average about 25 minutes. The speed is in the store. It is really about getting the pizza out the door in less than 15 minutes and then allowing 10 minutes to make it to your house.

How many stores do you have in Japan?

We have 185 stores in Japan. About 165 of those are corporate stores; the rest are franchisees. Right now, we are in Fukuoka, Kansai and Kanto. We’ll be looking to expand in suburban Tokyo, Osaka and Kobe.

I heard you opened an eco-store in Matsudo in Chiba Prefecture?

Yes, it is our first such eco-store. We have a fleet of electric bikes at that store. In the store, there is a very modern conveyor oven that is unique in that its blowers shut down unless there is a pizza on the conveyor belt. So we use less electricity and gas. We also use LED lighting, so we are able to achieve a 20-25% reduction in our carbon footprint.

Are you going to expand it to your other stores?

We’d like to, but the main problem is the battery life of the bike. To be efficient, it needs to have a 50-60-kilometer life. Now, it is about 20-25 kms. We need 50-60 kms to get us through the dinner rush.

When are your busiest times?

Saturdays and Sundays. We probably do 40-45% of our business on weekends. Also, fireworks festivals and Christmas eves are big for Japanese consumers. Last December was a record month for the company.

How are you going to cope with expected power shortages during the summer?

Nobody really knows yet what is going to happen. One approach is that we can serve customers who are in areas suffering power shortages by potentially delivering from stores in neighboring areas.

How often do you eat pizzas?

Almost every week when I am here, I go on store tours. That includes looking at competitors’ products. I usually do it on a weekend. I’m more likely to eat a slice here or a slice there. At home, I use the English website, so they know it’s me when I place an order. But I have a lot of other ways to check the service without letting on it’s me.

How many employees do you have in Japan?

About 4,000 employees, including part-timers. In stores, the staff tend to be younger, but I have met 50-year-old drivers.

What is a typical day for you?

I get up around 5:30 a.m. and go for a jog along the Sumida River. I get to the office around 8. Every day is different. I will often have meetings with the team and vendors.

You have a long commute once a month, don’t you?

I spend half my time in Dallas and two weeks a month here. I did it when I was in Taiwan, too. I probably crossed the Pacific 120 times in the last 10 years.

How do you like to relax when you are not working and not on the plane going to and from Dallas?

I like to play golf. I’m also into genealogy and can trace my family roots back to the 1500s.

 

  • 0

    tkoind2

    A question for Dominos.

    What happened to quality? The current Dominos pizzas taste like bad grocery store frozen pizzas. Compared to some in the US, even worst than. The fact that most major chains no longer offer customers the opportunity to create their own toppings, is another indicator that the pizzas are no longer made with the attention and care of bye gone years.

    Once upon a time, a long, long time ago, companies put quality and the reputation of their products above the desire for meeting ever rising financial targets. While the cheaper, lower quality products probably make you more immediate money, they also send people like most I know looking elsewhere for higher grade products for their families. Even if that means less convenience. This is good for the smaller business who is delivering higher quality at or around the same price point. But not good news for the long term for Dominos.

    Food for thought Dominos. How about talking to us about quality, and I don't mean the diminished 2011 quality. Let's ask why you no longer provide the quality of just ten years ago.

  • 0

    gaijintraveller

    tkoind2, many companies have realised that a good way to increase sales and profits is to shift money from the production budget to the promotional budget. This results in lower quality.

    If a product is heavily advertised, this often means it is low quality. A good demonstration of this would be a chain of English schools that went broke a few years ago. It was heavily advertised, but used the cheapest teachers it could.

    It is also true about beer.

    If you want quality pizza, you can get it in Tokyo. Try Tonino in Shimo Takaido, but that is Italian pizza, not American.

  • 0

    smartacus

    tkoind2

    I guess taste is subjective. I quite like some of Domino's current lineup, though I think some of their pizzas have weird toppings (for foreign palates) and they could be a bit cheaper.

    I wouldn't agree, though, that overall, the quality is low. By the way, if you check out their English website, you can order your own toppings.

  • 0

    tkoind2

    I used to order from Dominos quite often on weekends with friends when I first moved to Tokyo. The crust, cheese, sauce and toppings were not far out of line in quality with the US shops. Overall pretty good take out.

    But in the last 11 years the quality has dropped significantly. The toppings are not great, crust not great, and sauce is...well, not sure what it is. And the size has dropped off significantly. While price point does not reflect the drop in quality and size.

    Bottom line, as a consumer, I am tired of diminished quality for increased prices. So we boycott most places that do this and instead support smaller local business who must care about quality if they are to stay in business. Maybe we would all be better off without the large chains and with more local businesses selling us products and caring about their quality.

  • 0

    NetNinja

    The Iphone app is very cool. They still need to introduce that new crust here in Japan. If they did, I'm shocked cause I haven't noticed anything different. I noticed the topic of the crust was not discussed in this interview.

    As far as tech is concerned, Dominos is right on top. Even if the competition has a better pizza Dominos has made it faster to order it and get their product.

    As far as the industry goes. If you are a student reading this I suggest you not work for a pizza delivery company. Study more. I LOVE, absolutely LOVE to order pizza when there's a typhoon or deluge. That's so funny to see that drenched ronin holding a hot box for me. I can just imagine them being blown off course on the road, hydroplaning in those 3 wheel scooters. Didn't they remove the canopy recently? Hahahahaha

    Study more or deliver pizza.

  • 0

    Godan

    Their pizza isn't the best, but I really like the online ordering system, the guys showing up in 20-25 mins., and the shock on the delivery person's face when I tell them to keep the change. I especially like that last part.

  • 0

    MrDog

    I wish they'd do more "normal" pizza's. The menu is filled with mayonnaise-covered stuff, and they are stupidly expensive for a fast food.

  • 0

    Noripinhead

    They have a "foreigner-friendly" website but the quality of the product is less than mediocre. Sorry to say this, but Pizza-La kicks its butt.

  • 0

    BurakuminDes

    I wish they'd do more "normal" pizza's.

    Oh, c'mon - what isn't normal about corn, mayonnaise, fish eggs and seaweed on pizza?

  • 0

    tkoind2

    To be fair, Dominos, Pizza Hut, Pizza-La are all the equal of $6 frozen pizzas in the US. Utterly dreadful for the price.

    By contrast a few shops around the city sell the same size as the small of these delivery places and the quality is a whole head and shoulders above.

    The sad thing is this. We have rehearsals two or three times a month. Before we used to order a pile of pizzas from the usual chains. So we were very regular customers. But as the quality fell through the floor (unfollowed by the price) we stopped. Now we go out for food in the neighborhood instead. Good for local business, but if our music project is an indicator, I wonder how many other customers have these guys lost to crap quality?

    Come on Domino's. Less time on advertising and weird pizzas. More effort on quality. Or do you enjoy being the equal of bad frozen pizza?

  • 0

    GW

    I havent ordered in probably 10yrs but eat lots of pizza, glad no one will deliver to me because I am slightly in the inaka.

    Got a couple places that make great Za so frequent them, no turning back for this guy

  • 0

    Zenny11

    If we order Pizza delivery it is always Pizza-hut, much closer than Dominoes(ergo faster) and we get plenty of discount coupons dropped into my Inbox by them.

    For really good Pizza we got a few places close-by that we visit on a rotation basis.

  • 0

    ninjastar

    Pizza is the best food on the planet, next to buffalo wings. Dominoes ain't the tastiest (I used to deliver for them in the States - there's a reason why they taste like cardboard), but it's a nice option on a rainy Saturday evening.

  • 0

    mrsynik

    I still can't believe how much it costs to order a Pizza in Japan.

  • -1

    655321

    How about you start delivering to western Tokyo... As long as I've lived out here there still hasn't been any expansion out in this neck of the woods. Their loss really. Other competitors like Pizza Hut and Pizza-La are taking up all the business.

  • 0

    my2sense

    You guys stuff so much junk in my mailbox but hey so do the realtors and mizu racket too. Yes, I did put a sticker on my in mailbox that says no pizza and hooker flyers but that does not work...lol. In Boston or NY its 10 bucks a pie. My 2 cents... next meeting you go to offer to cut down the paper junk mail (I have literally seen a trash can full of Domino's flyers in my place every Sunday morning) and you may want to just dish out American style cheese pizzas for 1500¥ and blow the market away. Guess he didn't get the save the environment memo... Cheers President, CEO, Managing Director, VP Joe

  • 0

    Nessie

    As an extra bonus, the website featured a number of special offers and set menus exclusive to the English website, including more freedom in your choice of pizza and favorite toppings.

    Only in limited areas. Which is fine by me, becaus Pizza LA is much better.

  • 0

    BurakuminDes

    next meeting you go to offer to cut down the paper junk mail (I have literally seen a trash can full of Domino's flyers in my place every Sunday morning)

    my2sense - collect up all the dominos flyers for a month and go and dump them on the floor of the shop. I'm also sick and tired of flyers advertising crappy, expensive pizzas.

  • 0

    Mark_McCracken

    Dominos pizza has great tasting cheese.

  • 0

    tkoind2

    "Dominos pizza has great tasting cheese."

    Is that what that yellow film is?

  • 0

    Serrano

    "it ( our English website ) is still not very well known yet"

    This is not JT's fault, that's for sure!

  • 0

    lostrune2

    We order online all the time. There's even a real-time update meter, so ya know when to expect the delivery guy, instead of guessing if it'll be early or late.

  • 0

    genjuro

    No Papa John's yet in Japan...

  • 0

    tmarie

    Lower the price. Only then will I start to order from Dominos!

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