Can Domino’s survive Zomato & Swiggy?

Domino’s strategic move to launch its loyalty program, “Cheesy Rewards,” in July 2022 appears to be a successful initiative in regaining control over customer relationships and reducing dependency on food aggregators like Zomato and Swiggy. The program, offering a free pizza after every 6th order but exclusively for orders placed through Domino’s own platform, has shown impressive results:

  • 10 million quarterly app downloads
  • 16.8 million loyalty members
  • 10.3 million monthly active users
  • 48% of sales from loyalty members
  • Higher order frequency

This initiative has not only helped Domino’s tap into a significant untapped potential by realizing that a majority of its revenues come from a small fraction of customers but has also allowed the company to retain its brand identity and control over customer relationships.

However, sustaining a delivery-led business model in the long run poses challenges. Here are some factors to consider:

  1. Market Dynamics: Zomato and Swiggy, driven by aggressive discounting and growth-focused strategies, may continue to exert pressure on Domino’s. Market dynamics and customer preferences can evolve, impacting Domino’s ability to compete effectively.
  2. Dependency on Aggregators: Despite the success of the loyalty program, Domino’s still relies on Zomato and Swiggy for almost 25% of its sales. Any significant shift in market power may influence the dynamics of commission rates and terms, affecting Domino’s profitability.
  3. Operational Challenges: Managing its own delivery force comes with operational challenges and costs. Retaining delivery personnel amid the gig economy’s fluctuations and increasing salary expectations can impact Domino’s cost structure.
  4. Changing Consumer Behavior: Consumer behavior is dynamic, and preferences for ordering through aggregators versus individual platforms can shift. The convenience offered by aggregators and their extensive reach may influence consumer choices.
  5. Competition and Innovation: The food delivery segment is highly competitive, and innovation plays a crucial role. Domino’s needs to continually innovate, both in terms of its menu offerings and customer engagement, to stay ahead and provide a compelling reason for customers to order directly.

While the loyalty program has shown early success, sustaining a delivery-led business model requires a nuanced approach that considers evolving market dynamics, competition, and changing consumer behaviors. Domino’s needs to adapt to these challenges, possibly by leveraging technology, refining its loyalty program, and maintaining a balance between aggregator partnerships and its own platform.