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Peperoni PizzaThe sad sight of small, local stores closing their doors, unable to compete with international giants, is a familiar one in retail settings. But thus far, it has not been a major challenge for restaurants, because the offerings have been so differentiated. For consumers who want a basic meal, large chains offer consistency, but for those who want something unique and different on their plates, the local diner represents a more appealing option.

But the trends are changing when it comes to pizza. Because the major chains all now offer convenient online ordering systems, consumers are shifting their behavior and selecting Pizza Hut, Domino’s, or Papa John’s over their local pizzeria. The online systems are quick and easy. Consumers do not need to worry about having all their topping preferences ready to shout out quickly, to a harried and possibly rude order taker. Nor do they need to be concerned that someone will mishear their desire for “pepperocini” and load up their pizza with “pepperoni” instead. Once they plug in their credit card information, those data get stored, so ordering the next time around is even more convenient and quick.

For local eateries, the growth of online ordering has meant a substantial loss to their business. While the market share of the large pizza chains was growing from 47 percent to 52 percent nationwide, the shares for independent businesses fell from nearly 32 percent to less than 29 percent. Perhaps even more telling, the number of small pizza stores in operation has decreased by nearly 7 percent in recent years. Faced with a more efficient system, the small restaurants simply cannot compete.

Nor can most of them afford to establish their own online ordering systems, which would require significant investments in software, technology, and new staff. As an alternative, some restaurants turn to intermediaries like GrubHub or Seamless, which link hungry customers with various food purveyors on a single platform. Such platforms enable online ordering, but they also charge the restaurants a percentage of their sales. Furthermore, they add another layer, separating the people making the food from the people who consume it. In this sense, the online option might further diminish the difference between local shops and national chains—that is, the sense of personal service provided when the same person looks forward to answering the phone to take your pizza order every Friday night.

Source: Julie Jargon, “Big Chains Use Web Ordering to Slice Out Bigger Market Share,” The Wall Street Journal, February 6, 2014, http://online.wsj.com.

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