The Domino effect
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.