Is the World Hungry for Online Pizza?

When it comes to the Web, groceries are one thing, and not a very promising one at that. But what about prepared foods? It's possible that your corner pizza store could be quietly writing an e-commerce success story.

In fact, hundreds of pizza shops are using the Web effectively. Some are going it alone, but many are using a Chicago, Illinois-based firm called QuikOrder.com.

QuikOrder says it is on target to handle US$10 million worth of online pizza sales this year. That's up from a few thousand dollars worth in 1999.

Now, $10 million is barely a blip on the e-commerce radar screen. Heck, some e-tailers lost that much before their CEO got out of bed this morning. But under the dreary gloom of a Nasdaq that might be trying to redefine the term "bottom," any glimmer of hope is worth exploring.

The Works

No one in the pizza business has announced plans to move all of its orders onto the Web any time soon. That's not a reasonable goal. Any pizza shop that sets out to become an Internet pure play would probably fail miserably.

Nor is anyone trying to undo existing habits. Most people think along the lines of "let's call in for a pizza." But for young people, whose habits haven't yet been formed -- and for whom doing things on the Web comes naturally -- it makes sense to dangle a new option out there for them to try.

Here comes the tasty part: Pizza shops that have been using QuikOrder find they can charge a premium for Web pizzas. Why? Well, for one thing, they've done their homework and know that their Internet shoppers are an affluent bunch. They know that for now at least, there's little competition in the Web space.

But above all, they know that people will pay for convenience.

Pie Pays

Is the Web that much better than a phone call? For the average consumer, maybe -- or maybe not. It probably takes, what, a minute to order a pizza on the phone? It's tough to envision the Internet cutting that time down by much, if at all.

But there are upsides. How many of those little takeout menus have you lost or misplaced in your life? They're always hanging around until you need them, then they disappear. Click over to the pizza shop's Web site and voila, there's the entire menu sans tomato sauce stains.

And the QuikOrder system is now being tested across the U.S. by the Domino's chain, which has a one-click feature that enables customers to duplicate their last order quickly.

There's another advantage. With online ordering, the pizza company has the ability for the site to sort and store orders, while the customer has the luxury of ordering ahead of time. Let's say you've got time to order the pizza now, but don't need it until dinner. You can fill in a specific delivery or pickup time. Try that with a harried counter person on the phone and you're liable to go hungry.

Order Up

For the pizza shop, the upside potential of the Web is even greater. Orders are placed without a human being intervening. That means that the people behind the counter can go on serving customers or making new pizzas without stopping to answer the phone. One shop using online ordering reportedly cut the order-taking cost to 30 cents, about half of what the shop estimated phone orders cost.

The big question of e-commerce has always been whether e-commerce efforts by traditional businesses actually increase sales . Are the same people placing the same orders through a different medium, or do Internet sales add to the bottom line?

This question has lost meaning over time. Now that the days of milk and honey are over, the big question of e-commerce is: how can a company cut costs and boost margins -- even if incrementally?

Nice Price for a Slice

Now remember, cool heads must prevail. Instant riches from online pizza sales? Not likely. An overnight IPO? Nope. Stock options for the cooks and delivery people? Not in the plans.

But watch out, because a few cents on the cost side here and another dollar in the per-unit sales price there, compounded over millions of pizzas, could start to add up to something.

What do you think? Let's talk about it.