Oct 08 2018
Over the past five years, rising health consciousness has forced companies within the Australian fast-food industry to use digital platforms to leverage on convenience and maintain their share of a maturing market. McDonald’s and Domino’s are two of the most prolific in this digital revolution, and have used new technology to attract and retain a younger audience while implementing co-creation, or consumer collaboration. Despite this trend, during the two years through 2011-2012, fast-food retail sales declined, due to consumer preference shifting to healthier food options.
While pizza accounts for the third-largest share of the fast-food market, and burgers the largest, these segments have shrunk over the past five years due to strong industry competition. Traditional fast-food retailers have had to counter lower demand, as increasing health consciousness has caused consumers’ preferences to shift to healthier and more premium choices.
Despite these factors, traditional fast-food retailer McDonald’s Australia Holdings Pty Limited, a subsidiary of the US-based McDonald’s Corporation, is still a dominant force among fast-food retailers, with a 16.0% market share. However, McDonald’s Australia’s sales revenue decreased by 7.4% in December 2014. Nevertheless, in August 2014, the company launched a home delivery service, named McDelivery, to increase the company’s competitive advantage and leverage on convenience. In July 2015, McDonald’s Australia launched its co-creation initiative, which gave consumers the option to create their own burgers instore via touch screens. These initiatives aimed to counter shifting customer preferences by allowing greater choice.
Although Domino’s Pizza Enterprises Limited is outside the top four major players in the fast food industry, the company is considered an industry leader in meal-order platforms. Domino’s Pizza operates over 600 stores in Australia and New Zealand. In mid-2013, the company established a website and app platform that enabled consumers to order and customise their pizzas from their phone, tablet or computer. As a result of its digital initiatives, Domino’s sales revenue growth increased by 140% in 2014. Today, over 60% of the company’s total sales originate from their online platform, clearly demonstrating the success of Domino’s digital implementations.
The fast-food services industry will continue to change as the digital age progresses, particularly due to the growing presence of online and mobile ordering systems and platforms. These new platforms are expected to appeal to a younger demographic and enable fast-food companies to capitalise on convenience.
Online apps and social media have changed the nature of the relationship between fast-food retailers and customers. By allowing customers to participate in food creation, fast-food retailers have attempted to enhance customer loyalty. Moreover, online platforms target a particularly young audience, which is the industry’s core demographic. Both McDonald’s and Domino’s are pursuing business strategies aimed at attracting and retaining consumers who are more health conscious, by allowing them to design their own meals. While fast food industry revenue is expected to remain relatively flat over the next five years, IBISWorld expects more companies to adopt similar platforms or develop further technological initiatives to re-engage consumers.