Every brand has a unique story following its inception, and DoorDash is no different. DoorDash is an American meal delivery service that serves as a bridge between users and restaurants. DoorDash works with local restaurants to deliver food to users who want to enjoy the convenience of home service.
DoorDash is one of the most popular go-to delivery services. The company has grown its business by offering delivery services for many local restaurants and food retailers by providing a convenient way for customers to order food online, pay, and receive orders.
Users can order food directly on the company’s website or with the app available on Android and iOS. In addition, the company assigns drivers, called Dashers, to meet demand delivery demands of its hundred of thousands of users.
DoorDash is fast taking over the industry and displacing its other competitors. How did a company so big and successful start out? You’re about to find out.
A Brief History Of DoorDash
Four students from Stanford were inspired to try out a business idea in 2012. These students: Stanley Tang, Tony Xu, Andy Fang, and Evan Moore decided to take the business of food delivery platforms a step further. Before then, food delivery platforms served as restaurant listings.
These creative minds decided to test-run a business model, where the platform will also be responsible for the deliveries of food and beverages. They started in 2013 in a small area, Palo Alto, and operated with the domain name PaloAltoDelivery.com.
After the trial period, the results of the test came out positive. It was confirmed that the business model was valid and that people needed such services. The business rebranded as DoorDash and launched officially to start deliveries in 2013.
DoorDash joined forces with the accelerator Y combinator five months after its founding and two months after its launch. This partnership availed the company of seed funding of $120,000 in March 2013. This funding was a much-needed boost for a new business that wanted to thrive.
DoorDash got registered as a Delaware corporation on May 21, 2013. And in June 2013, the name “DoorDash” became official. Nine months after its launch and a year after its founding by Y Combinator, the company received second funding in a seed round totaling $2.4 Million. SV Angel, Charles River Ventures, Khosla Ventures, Andy Rachleff, Pejman Mar Ventures, Russell Siegelman, and Paul Buchheit made the second funding possible.
In May 2014, the company received third funding totaling 17.3 million in Series A financing. Sequoia Capital led the financing alongside other existing investors. The Series A financing brought the value of DoorDash to about $73.5 Million.
The company expanded geographically in 2014 to Los Angeles and Boston. That same year, the company introduced cyclists as part of their delivery service. This step was taken to reduce the time it took to get different orders to its owners.
The company unveiled its new logo in November 2014, inspired by the Japanese bullet train. A series B financing in March 2015 valued the company at $600 million. In addition, the company added its service to the mobile platform and launched its app in 2015.
DoorDash had to deal with many lawsuits, especially regarding the drivers it hired as contract workers. However, the numerous cases the brand faced encouraged others to press for a partnership.
The company kept expanding, and by the end of 2015, DoorDash services were found in 22 markets and over 250 cities with thousands of restaurants in partnership. After its 5th financing in 2016, DoorDash had raised $127 million and was valued at $700 million.
Notably, the company partnered with Anheuser-Busch that same year to start Alcohol delivery services. The company progressed rapidly and is now present in over 4000 cities in the United States, Germany, Australia, Canada, and Australia, with over one million drivers registered as dashers.
Also, the company’s founders have retained their ownership, with Tony Xu as the company’s CEO and Andy Fang as the CTO. DoorDash is currently the largest third-party delivery service in the United States.
DoorDash filed for a public offering, an IPO, on Nov. 13, 2020. The IPO started with a $102 per-share trading price on Dec. 8, 2020. The trading price of $102 per share would have valued it at $32.4 billion.
But, the company closed with a $189.51 per-share trading price on Dec. 9, giving it a market capitalization of $72 billion. The market capitalization was inclusive of the employee-owned shares.
DoorDash reported 317.7 million shares outstanding after its initial public offering (IPO).
As of Feb. 18, the company’s share price was $96.21, placing its market capitalization at $33.01 billion. DoorDash currently has a net worth of around $4.67 billion.
DoorDash Business Model
The brand’s business model is based on two key components: the app and the delivery driver. The app allows users to order from select restaurants and get their food delivered to their home or office within minutes, usually an hour of ordering.
Users also get food and beverage suggestions when placing a new order based on previous orders. Customers can pay between $5- $8 for each order, which includes a delivery fee of $5 and a gratuity of 20 percent. This allows DoorDash to keep costs low while generating revenue from each order.
The driver that delivers the food is another essential part of DoorDash’s business model. Door Dash drivers are independent contractors who use their vehicles, equipment, and own personal vehicles to deliver orders provided by Door Dash.
DoorDash’s Business model is a Y-structure that unites the users, the restaurants, and the dashers who work as delivery agents. The company gets its commission from the delivery fee, between $5- $8 per user.
With DoorDash functioning in over 4,000 cities across America and Canada, its services connect these three business models:
The Food Business
Restaurants are an essential part of the DoorDash business workflow. Unfortunately, most restaurants don’t have any home delivery service. And this is where DoorDash comes in with its efficient transport network. It’s a win-win for businesses looking for new ways to reach new audiences daily while still delivering to their existing user base.
Users
After the food business, the users come next. Everyone has to recharge and eat at some point, but not everyone has the time or energy to eat out. This is where DoorDash comes in to help solve the issue. The company offers a platform where people can order food and beverages online, pay, and deliver them to their chosen location.
People in the corporate world who has very little time to waste because of their tight work schedules, people who dislike cooking, and more. All these people find relevance in the service DoorDash has to offer.
Users can find suggestions of the popular choice of other users in different restaurants and schedule their orders beforehand. Another admirable feature is the ability to live track the order with the live tracking feature on the app. In addition, the company has responsive customer support that quickly helps to resolve issues.
Dashers
The Dashers are people looking for flexible jobs with excellent tips. The Dashers get to choose their working schedule so long they deliver excellently. Each Dasher’s conduct will influence the user’s perception of the brand.
DoorDash generates its revenue in several ways:
1. Business Commissions
DoorDash provides businesses with the platform to reach their desired market. The users, in turn, get to order from their favorite restaurants. By doing this, DoorDash receives a commission of about 20%.
2. Delivery Fee
DoorDash uses its transport network to deliver food and beverages to users. Attached to each order is a delivery fee of $5 -$8, which goes to the company.
3. An Advertising Platform
DoorDash uses its platforms for advertising different food businesses and services to help them find new leads and markets. In return for advertising with DoorDash, these businesses are given preference which helps them reach more people than others.
All these are ways DoorDash generates its revenue. By offering all the services they do, they have remained at the forefront of being the most prominent third-party delivery service in the USA.
DoorDash Competitors
- GrubHub: GrubHub is another popular food delivery service widely available across the United States.
- Uber Eats Another popular food delivery service owned by Uber, the ride-sharing giant.
- Postmates: A food delivery service from restaurants that do not offer food delivery or pre-orders.
- ChowNow
- Waitr
DoorDash Strengths
Some noteworthy features complement the brand. One such is the spotlight DoorDash has earned for itself.
DoorDash is a leading market in online food delivery and convenient delivery. The brand partners with an extensive network of over 45,000 restaurants and 1 million to reach 20 million users who need the services they render.
Users can access these services by placing their orders through the app. Thankfully, it’s a user-friendly platform and doesn’t require any complexity.
DoorDash Weaknesses
- DoorDash has high commission plans starting from 15% to 30%. Unfortunately, not all small businesses can afford their commission plans.
- Its delivery fee is on the high side as well.
- DoorDash has had ten years of operating history in the market.
- Over the years of DoorDash’s operation, there have been quite a several unresolved customer complaints and canceled orders. This is not good for a business trying to retain its customers.
- DoorDash has powerful competitors in the same market.
- The brand is associated with multiple lawsuits and proceedings.
DoorDash: Its Current Position In The Food Industry
DoorDash was founded as a food delivery service in 2013 and started its operations in the United States, Canada, and Mexico. DoorDash is currently at the top of its game, with over 1 million daily deliveries.
DoorDash has grown quickly because of a strong network of drivers and an existing partnership with restaurants that are willing to work with them. They also have a solid customer base ready to use their services for food delivery.
DoorDash is currently at the top of its game with a valuation of $4.67 billion. They expanded to new markets such as India and Europe. The $8 billion all-stock takeover of Finnish Start-up Wolt in 2021 helped hasten their expansion into the European market.
DoorDash has expanded its services to include more than just food delivery. They have started delivering other items, such as groceries and alcohol. In addition, they have expanded their services internationally with new offices in Canada, Mexico, and the United Kingdom.
DoorDash utilizes technology in all its operations. The brand is also making great innovative strides. For example, DoorDash has developed a 10-point rating system for restaurants.
This score, called the “Delight” score, is based on several criteria users can use to communicate their feedback. For example, more popular restaurants offering excellent delivery experiences will have a high delight score.
Users can choose restaurants with a good delight score to make their food and beverages ordered from and pay. The Delight score is one of many things DoorDash has planned out. Users should expect new innovative features and services from DoorDash in the future.
DoorDash is currently only concerned with food delivery. But it is considering expanding to other aspects as well. So it will be something to look forward to, seeing the brand is a tough competition to others in the delivery industry.
What Does The Future Hold For DoorDash?
DoorDash constantly brings new ways to improve its existing innovation and business strategies. In addition, the company is dedicated to maximizing its users’ satisfaction because customers’ experiences influence how the public perceives the brand.
It has become more challenging for businesses in the food industry to stay afloat and be relevant. But DoorDash is committed to finding new ways to stay at the top. First, however, DoorDash has to pay more attention to its customer retention.
DoorDash started strong, but today it’s facing serious challenges. The company’s stock closed at $245.97 last November. But today, the company’s share traded at $70, below 30% of its initial IPO price of $102 in December 2020.
DoorDash is starting to lose its appeal to customers and its shareholders. And here is why:
- During the lockdown, many people had to resolve to order their food online. But it’s post-lockdown, and people have started dining out again.
- The company’s interest rates are increasing, and its investors are reluctant to bid up stock prices because of the future impact of lower earnings.
- Amazon’s current deal with Grubhub will pull diners away from DoorDash. And here is how.
GrubHub fell behind competitors after failing to capitalize on an early lead in the food delivery market. As a result, just Eat concluded its acquisition of GrubHub last June in a bid to revive the struggling American subsidiary. But for some time now, it has been considering a resale which is yet to click.
Amazon stepped in to offer Grubhub a deal. Amazon is offering all its U.S Prime members a free one-year membership to Grubhub and free deliveries for over $12 for its monthly membership plans. This offer includes free food and other freebies.
If its prime subscribers of about 166 million consumers make good use of this offer, it will deliver enough customers to Grubhub, and DoorDash will face further declines down the road.
- Inflation is also a key factor affecting DoorDash. Fuel prices are at an all-time high, making it difficult for Dashers to earn a sustainable income.
DoorDash has added “gas rewards” to its orders to offset the effect of inflation on fuel prices for its drivers. However, these rewards only ease the pressure of high gas prices.
Inflation has also affected food prices, and it’s now on the high side. As a result, most customers will rethink their decisions to pay extra for third-party deliveries unless it can’t be helped or they can afford it.
Even if DoorDash pushes through with its plans to handle the costs of gas rewards for Drivers, there will still be a near-term margin.
- DoorDash is still under pressure from several states to convert its dashers from independent contractors to employees so they can enjoy better wages and benefits.
DoorDash is firmly against such a measure and has resisted the pressure to convert its contractors to employees. But with its intentions to expand into major markets like Australia, it might have to rethink this decision.
Conclusion
DoorDash is currently in the red due to its recent downside potential. As a result, investors are rethinking their decisions to invest in the company because of the red flags. It’s too early to draw the curtains on DoorDash. But it’s still possible to revitalize the company.
The CEO Tony Xu is taking steps to ensure the company remains relevant in the industry. He stated on the 30th of November, that the company is being more intentional about its operating expenses.
The decision to cut its operational expenses will impact its employees because the company is laying off 1,250 employees. But with benefits in place and enough time to get new jobs. Tony Xu added that in the future, there will be more tough decisions to make to ensure the business keeps growing.
