Should retailers ‘tip’ customers to pick up orders?

Discussion
Photo: Domino’s Pizza
Feb 02, 2022

Domino’s Pizza is giving its customers a $3 tip if they pick up their food orders rather than have them delivered.

The pizza chain is making the move in the lead up to the Super Bowl, its busiest day of the year, knowing it may not have sufficient staff in some areas to keep up with demand. The company typically sells around two million pizzas on Super Bowl Sunday.

“It takes skill to get pizza from a Domino’s store to your door,” Art D’Elia, Domino’s executive president – chief marketing officer, said in a press release. “As a reward, Domino’s is giving a $3 tip to online carryout customers who take the time and energy out of their day to act as their own delivery drivers. After all, we think they deserve it.”

Domino’s offer does come with caveats. Customers who place orders online through May 22 will be eligible to claim a $3 coupon code, which they may use for a carryout order placed the following week. The chain is allowing customers to add their $3 “tip” to other offers it has on carryout orders for even more savings. A $5 minimum purchase is required.

Domino’s challenge is common in foodservice and retailing where businesses have seen a marked increase in online ordering since the outset of the pandemic nearly two years ago. Companies, already struggling to maintain sufficient staffing, have taken a further hit from the outbreak of the Omicron variant as infected or exposed workers are forced to take time off.

The high cost of deliveries is putting pressure on margins and a growing number of retailers are offering incentives for customers to pick up. Petco offers a 15 percent discount on curbside pickup orders of $50 or more. Pet Supplies Plus is currently running a two-day offer (ends today) that gives customers 25 percent off any curbside pickup order ($50 maximum discount).

Amazon.com’s Whole Foods business offers free curbside and in-store pickup for Prime members but charges a $9.95 fee for deliveries. The chain said the fee enables it to sell groceries online for the same price as in-store and helps cover the costs associated with the service.

DISCUSSION QUESTIONS: Do you expect more retailers to offer financial incentives for customers to pick up their online orders rather than choosing delivery? What are the keys for retailers looking to differentiate their pickup options when so many other companies offer similar services?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"We all know that the $3 tip is really a coupon but the way it’s framed is so different, it’s cool. And it takes some of the heat off of delivery people."
"This is a clever way to address the issue! Bravo Domino’s!"
"What’s next? Perhaps we start paying customers to use the self-service checkout at the grocery store."

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30 Comments on "Should retailers ‘tip’ customers to pick up orders?"


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Mark Ryski
BrainTrust

Retailers can’t continue to lose money on delivery orders so, yes, I’d expect to see much more activity on programs designed to encourage customer pick-up. The key to an effective pick-up program is to have one that consistently delivers as promised. There’s nothing worse than booking your curbside pick-up only to wait extra time as the poor attendants scramble to find your missing order. So executing consistently is very important to building consumer trust. Financial incentives also don’t hurt.

Neil Saunders
BrainTrust

This is a smart way of reducing the pressures brought about by the labor shortage and rising wages and prices. The voucher isn’t really a straight tip, it’s a coupon that can be used on future purchases – which potentially drives more repeat custom to Domino’s. As for other retailers, I expect more will try and incentivize customers to use lower cost methods delivery such as in-store collection. After all, the true costs of home delivery have never really been passed along to the consumer in full and I can’t see that changing in the near future.

Georganne Bender
BrainTrust

We all know that the $3 tip is really a coupon but the way it’s framed is so different, it’s cool. And it takes some of the heat off of delivery people.

Domino’s has a very creative marketing team that always comes up with unique and different ways to connect with customers. It’s always fun to see what they will do next.

Jeff Weidauer
BrainTrust

Ever since Amazon made free delivery an expectation, retailers have struggled with the costs of home delivery. Providing a financial incentive for customers to pick up orders makes a lot of sense – I see this quickly becoming a standard practice.

Katie Thomas
BrainTrust

Well first all, I have to tip my hat to Domino’s for their marketing schemes. Between this and buying local restaurants’ gift cards, as advertised, they are quite clever – making friends with “competition” and consumers.

The pick up piece is an interesting one – lots of variation by market. I live in Pittsburgh and would guess people wouldn’t mind picking up their order as much because most people use their cars regularly. In a big city, depending on the location, the pick-up could be a lot more of a pain.

But for all the delivery services out there — how are the economics still not figured out?

David Naumann
BrainTrust

Great points Katie and clever use of “tip my hat.” There are definitely nuances by geographic location, especially in big cities like New York where customers don’t want to walk blocks to get their pizza. Personally I prefer carryout for pizza, as I know it will be warmer than waiting for a driver that may have multiple deliveries before our house. The “tip” is really a coupon/discount. Whatever you call it, I think it will appeal to many cost conscious customers.

Jeff Sward
BrainTrust

This is hysterical. “Free” doesn’t cut it any more. Now customers have to be paid to do what they would have normally done not that long ago. I get that paying the customer is cheaper than paying a delivery guy, but can you imagine the response if this exact scenario had been predicted in an article just a few short years ago?

David Slavick
BrainTrust

This is brilliant. Domino’s achieves both bounceback orders with $3 savings on the second order and demonstrates concern for the environment by cutting down on delivery traffic. Adoption of EV is on the horizon as well. This will be a sustained trend, no doubt, in retail.

Liza Amlani
BrainTrust

This is a smart strategy for brands and retailers to think outside the box when it comes to getting customers into stores and restaurants. Offering incentive is a feel-good move and shows customer appreciation in return for loyalty. More retailers could learn from other verticals and hospitality on how to serve the customer with delight and appreciation through incentives.

Lee Peterson
BrainTrust

This is a good idea. Nice one, Domino’s.

Steve Montgomery
BrainTrust

Great idea. I see this as the start of something big. I expect it to follow the same growth pattern as the growth of the subscription model. “Hey, that’s a crazy idea” morphing into “perhaps it’s something we should try,” to eventually becoming a standard option.

Jennifer Bartashus
BrainTrust

It makes sense that in some situations incentivizing customers to pick up online orders can help manage surges in demand and labor costs. There will be a perpetual need for balance between profit and convenience, and incentives can play a role. However this also means retailers have to have an excellent process management for pickup so that it is easy for customers. Saving a few dollars to pick up an order can easily be outweighed if the experience itself is so poor customers never want to do it again.

Dave Bruno
BrainTrust

Another slice of marketing brilliance from Domino’s. I don’t love the idea of taking another bite out of margins in the last mile, nor do I love once again setting shopper expectations for free (or better), but the net effect is a win-win for Domino’s, and I actually like incentivizing people to come to the store with an offer that incentives another store visit. In specialty retail, getting them to the store is even more important because of all the add-on/impulse sales that come with store pickups (when they go inside the store).

DeAnn Campbell
BrainTrust
Retailers should move heaven and earth to entice shoppers to pick up their online orders in the store, not only to reduce shipping but to improve the quality of the customer’s retail experience. It’s shocking to me that the average profit margin for e-commerce is 2 percent to 4 percent – and that’s what is considered good (compared to 20 percent or more for physical stores). Most companies, including Walmart, have yet to see any consistent profit with their online business. Brick and mortar is an essential component of improving the overall health and profitability of retail. Furthermore it’s the only reliable way to control your customer’s experience to maintain shopper loyalty in the face of overwhelming online competition. Incentives in the form of discounts for both pickup and returns are a good start. I’m also a big proponent of charging for shipping – even a small amount – to combine the carrot and stick approach to encouraging in store pickup. When you combine the shipping cost savings, the pick and pack labor savings, the… Read more »
David Slavick
BrainTrust

DeAnn — you really sunk your teeth into this one, kudos!

Chuck Ehredt
BrainTrust

This strikes me as an incentive like many other types of incentives – and their delivery cost is probably at least $3. The customer probably also saves $2-$5 on the tip they would have provided the delivery person.

Incentives (like loyalty points, etc.) should be used to drive the type of customer behavior that helps a company optimize its operations. Too many companies only incentivize purchases and miss out on these broader emotional and/or optimization tactics. Modern loyalty technology (microservices, SaaS-based, API-first) makes adding such incentives at any customer touchpoint as easy as adding one line of software (code).

David Slavick
BrainTrust

Charles…you are a big tipper! But your point about avoiding a tip “expense” is another component I actually had not thought of. So many pizza companies use marriage mail to send coupons to consumers in their trading area and offer “free delivery” plus actually limit the number of coupons you can use with redemption. Pretty silly really.

No less disappointing is limiting savings to the F&B customer that orders through the mobile app and only give benefits to that segment of their customer base. Nothing like making X number of your loyalist be frozen out of benefits all in the name of mobile app adoption and convenience.

Dick Seesel
BrainTrust

In a way, the $3 “tip” is not much different from the price incentives that a service like DoorDash offers. (Store pickup eliminates the delivery fee, and it often involves an extra discount.) But framing this as a “tip” instead of just another deal — and turning it into a bounceback coupon — is a smart way to frame the offer.

Jenn McMillen
BrainTrust

It boils down to one question: Is it cheaper to incent customers or pay hourly labor?

David Spear
BrainTrust

Smart marketing move by Domino’s, and it will be used by millions of consumers. If you step back and think about this, it’s nothing new. For 30+ years, CPGs have enticed consumers with coupons (BOGOs or $1-$4 off the price a promoted product if it’s purchased within a select timeframe). Is this any different than the Domino’s offer? In many ways yes, due to the environmental factors facing us, but in other ways not so much. I applaud Domino’s marketing and communication strategy. It’s brilliant and they always are a step ahead of others. You can bet I’ll be ordering several pizzas for the Super Bowl party at my house!

Joan Treistman
BrainTrust

It comes down to perceived value and convenience. $3 for pizza, whether in the form of a coupon or not, offers a relatable value. It’s going to be more difficult for retailers with bigger ticket items to find that sweet spot. And let’s not forget about how much discounting is going on. So a percentage off a discounted item may cut the profit right out from under the retailer. No doubt retailers will have to be savvy about how to offset their staffing challenges with monetary incentives. But consumers expect retailers to offer convenience and mostly with no strings attached.

Shep Hyken
BrainTrust

That’s an interesting topic! Tipping the customer to come to the store and buy versus have it delivered. What’s next? Perhaps we start paying customers to use the self-service checkout at the grocery store.

Seriously, I get what Domino’s is trying to do. They are giving an incentive to not take delivery. I’m good with that.

Richard J. George, Ph.D.
BrainTrust

Remember, the original mantra of Domino’s, “Pizza Fast, Pizza Hot.” Eventually Domino’s scrapped the 30-minute delivery promise. This is the latest attempt by Domino’s to develop a differential advantage. The way the tip works it creates continuity of purchases. Yes, it addresses significant labor and delivery savings, but the beauty is how it repositions the original king of delivery.

Patricia Vekich Waldron
Staff

The industry’s cost structure – and associated labor requirements for delivery – needs an overhaul. This is a clever way to address the issue! Bravo Domino’s!

Brad Eckhart
Guest

I definitely think the idea of incentivizing customers to utilize BOPIS and curbside pickup is going to be adopted by more retailers. It’s a great way to reduce the negative impact that delivery has on margins. Domino’s approach in referring to the incentive as a “tip” is on-brand and is something other retailers should recognize and apply to any incentives they may offer to their customers.

Lucille DeHart
BrainTrust

Yes. I would expect retailers to look for ways to optimize their profits given new customer trends. Delivery is expensive–staffing overhead, vehicles/insurance, scheduling and product loss enroute to destinations. It will be interesting to see if non-food categories will incent in-store shopping as well.