Domino’s Pizza and Panera: Keeping Control of Delivery

Two delivery-related stories caught my attention recently. The first one is about Domino’s Pizza and why it doesn’t work with third-party delivery companies like GrubHub, DoorDash, and UberEats. As Heather Haddon reported in the Wall Street Journal:

Domino’s Pizza Inc. is one of the largest chains to stay off the new third-party delivery apps altogether. The company relies on its own employees to make deliveries from its 6,000 U.S. stores and most of its 11,000 international ones, and it runs its own online-ordering app. Chief Executive Ritch Allison said the profit hit and reputational risk [emphasis mine] of working with delivery companies isn’t worth the extra sales.

Both Jimmy John’s [which is also keeping delivery in-house] and Domino’s have built their reputations on fast service, going so far at times as to guarantee orders will arrive by a certain time. That has made control over their delivery fleets all the more essential and the risk of contracting out to independent drivers too high [emphasis mine], executives have said.

Last week, CNBC published a story about Panera and its partnership with UberEats, DoorDash and GrubHub. At first glance, it looks like Panera is taking a completely different approach to delivery. But when you read the details, you’ll notice a common thread:

Customers can now order Panera for lunch or dinner on DoorDash, GrubHub and UberEats. Panera’s own delivery drivers will still be responsible for delivering food to the customers [emphasis mine].

Panera initially tested third-party delivery aggregators before choosing to undertake the challenge of building its own delivery program in 2015. The company cited its ability to provide a better customer experience for why it decided against outsourcing delivery [emphasis mine].

Both of these cases underscore a point I discussed last year in a webinar organized by Descartes Systems Group (a Talking Logistics sponsor) focused on “Delivery – The Moment of Truth.” As I wrote in a follow-up post:

Delivery has always been part of the order fulfillment process, but it’s only been in recent years that it has emerged from the shadows, from being a cost center and a back-end process to becoming a competitive differentiator and a key driver of customer experience.

Everything can go perfect on the front end of the sales process, you can succeed in meeting those moments of truth that [former P&G President and CEO A.G. Lafley] talked about, but a poor delivery experience can quickly negate it all.

It also echoes a point made by Brian McCarthy, former Logistics Director at Dreams, Britain’s leading bed retailer. Here’s what he said in an interview I conducted with him three years ago:

“The key to home delivery and doing it profitably,” explained McCarthy, “is you have to provide brilliant service to customers, and brilliant service comes at a cost. I see it as my job to help educate the people I work with — above, beside, and below me — to understand that the customer experience is critical [emphasis mine].”

Simply put, the reason Domino’s Pizza, Panera, and others are keeping delivery in-house — and why Amazon continues to invest in its own delivery capabilities — is that delivery is tightly linked to customer experience and brand reputation. And those two things are becoming greater competitive differentiators across all industries today.

This is also another data point supporting my hypothesis from five years ago: That as manufacturers and retailers start to view logistics as a core strategic function, their desire to take more control will increase, and so their desire to outsource will diminish. What does this mean for third-party logistics providers (3PLs)? It means that your biggest competitor moving forward might not be other 3PLs, but your own customers (see Amazon and FedEx).

What’s your take on Domino’s Pizza’s and Panera’s strategies on delivery? Will DoorDash, GrubHub, and UberEats simply become food ordering websites over time, leaving the responsibility for delivery to its chain restaurant customers? Post a comment and share your perspective!

For related commentary, see the following posts: