“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”-This was the headline that appeared in Mint on Aug3rd, 2015
The article goes on to mention how the online ordering from
both mobile and desktop are steadily increasing for fast food chains like Dominos,
Pizza hut (more the than 30% of total
orders) .It quotes research from the US market and makes a case for a similar transition
in the Indian market . “Online food ordering is projected to cross phone
ordering in the US, and this would happen in India as well in the near future
.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.” 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. “
The author has put forth facts which highlight transition
of channel migration of fast food chains from phone to online sales and its inevitability
in India.
Now if we look at the headline -“Fast
food firms get sales boost from online orders”, - that inference can never be drawn from the facts presented
There is no correlation
in the facts presented -share of online ordering increasing for fast food
chains- and the sales boost due to online ordering. We can clearly make a case
of online ordering increasing sales if there is conclusive evidence that most
of the online orders were new customers and not existing customers who were
merely transitioning from a call center channel to online ordering.
If they were new customers that would reflect in the year
on year growth data. This analysis was not done in the article.
When I looked at the same store sales growth of Dominos the
country's largest quick service chain and operator of Domino's Pizza and
Dunkin' Donuts outlets, it posted a 6.6% increase in same-store sales in the
January-March quarter of FY15. This was a recovery after about six quarters of
stagnant growth of declining revenue.
Now this 6 percent rise could be attributed to online sales, but there’s no basis for this inference unless you have analyzed the sales data
split by channels of ordering.
But that’s what the headline chose to focus on instead of
focusing on the benefits that online ordering brings by way of lower customer acquisition
costs and focused marketing initiative that have a direct impact on the bottom
line
The direct consequence of this transition to online
ordering would be an increase in the
bottom line due to reduced dependence on call centers which can bring down
costs down by 40-50% .Now this is a fact that can the author has mentioned ,but
sadly not as the key takeaway which for
some reason focuses on growth.
P.S: The promoters of HT Media Ltd, which publishes Mint
(where this article appeared), and Jubilant Food Works owners of Dominos are closely related. There are no
promoter cross-holdings. This is a fact that appeared in the article. Could
that be one reason it focused on growth? :)
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