DoorDash is arguably the U.S. The most popular food-delivery service in the U.S. with hundreds of thousands of users. The DoorDash business model is designed to be mutually beneficial for both users and restaurants. It enables individuals to conveniently order food and beverages from various establishments through a single platform, while also giving businesses the advantage of an expanded customer base.
DoorDash has experienced rapid growth and successfully outpaced major competitors including GrubHub, Uber Eats, and Postmates, and achieved an estimated 35% market share. This achievement signals significant success in the business, especially in light of the fact that on-demand food delivery services are showing an annual growth rate of 20% and are projected to generate $365 billion in revenue by 2030.
An Overview of DoorDash’s History
| Characteristic | Value |
| Founders | Tony Xu, Andy Fang, Stanley Tang, and Evan Moore |
| Legal Name | DoorDash, Inc. |
| Total Funding | $13.8 billion |
| Total Employees | 100,000+ |
| Industry | Food delivery |
| Revenue | $2.1 billion (2023 Q2) |
DoorDash originated in 2013 when four Stanford students – Tony Xu, Stanley Tang, Evan Moore and Andy Fang – founded an early iteration known as PaloAltoDelivery.com.
During that period, food delivery platforms primarily functioned as restaurant directories. However, the students tried to revolutionize this model by experimenting in a limited area. He introduced the concept of a platform that is not only responsible for the listing but also for the actual delivery.
After validating their innovative business model, the founders rebranded the venture as DoorDash and became a participant in the prestigious Y Combinator accelerator. This change propelled DoorDash to rapid expansion. Within just two years, the company established its presence in 18 US cities, with a valuation exceeding $600 million.
Throughout its journey, DoorDash faced legal challenges, particularly related to the classification of drivers as contract workers. However, these obstacles did not prevent the company from becoming a leader in the industry.
Towards the end of 2020, DoorDash launched its initial public offering (IPO). Currently, the company operates in over 4,000 cities spread across the United States, Canada, Australia, Japan and Germany. Notably, DoorDash has amassed a registry of one million drivers under the designation ‘Dashers’.
Who Owns DoorDash?
DoorDash remains owned by its founders. Tony Xu serves as the CEO within the company, and Andy Fang serves as the CTO. Christopher Payne, a former member of eBay’s board from 2009 to 2014 and Tinder’s former CEO in 2015, took on the role of COO at DoorDash from 2016 to 2021. In May of that year, he was appointed chairman of the company.
DoorDash’s Mission Statement
Our mission is to empower local communities and, as a result, find new ways for individuals to earn, engage in meaningful work, and thrive. We are driven by the idea of facilitating the movement of goods through the interconnection of people and opportunities.
DoorDash
How does DoorDash generate revenue?
Revenue sources:
1. Charge
DoorDash employs a multi-tiered fee structure tailored to specific geographic locations and demand dynamics to generate revenue:
- Delivery Fee: $1.99 to $4.99
- Small order fee: approximately $2.50
- Service Charge: Around 9% to 11% of the total
2. Commission:
In addition to its fee structure, DoorDash generates revenue through commission. These commissions are deducted from the order grand total at the completion of each transaction on the DoorDash platform. Various commission plans are offered to select restaurants:
- Basic plan: 15% commission, with higher customer delivery fees and restricted delivery coverage.
- Plus Plan: 25% commission, which includes reduced delivery costs, extended delivery coverage, and membership in the loyalty program.
- Premier Plan: 30% commission, lowest fees, comprehensive delivery coverage, loyalty program participation and guaranteed 20 monthly deliveries (with chargebacks for any shortfalls).
3. Membership Model:
DoorDash has launched DashPass, a subscription service that offers unlimited delivery with no delivery fee (for orders over $15) at a monthly cost of $9.99. Currently, DashPass has a customer base of over 1.5 million.
4. Software as a Service (SaaS):
DoorDash Storefront is a software solution designed for restaurants that want to set up their own personalized ordering and delivery systems. Traders subscribe on a monthly basis to access this platform.
5. Dashmart Description:
Through DashMart, DoorDash’s services have been expanded to more than 2,500 convenience stores, in collaboration with major retailers such as CVS, Walgreens, 7-Eleven, Wawa and others.
6. Acquisition:
DoorDash has completed the acquisition of four companies, expanding its operations:
- Caviar (2019): A food-ordering and delivery service.
- IvI5 (2019): A software firm using computer vision for mapping in robotics and autonomous vehicles.
- Rickshaw (2017): A Delivery Network.
- Scotty Labs (2019): A teleoperation company focusing on self-driving vehicle technology.
Physical Store Presence
Collaborating with renowned San Francisco eatery, Burma Superstar, DoorDash opens Burma Bites, marking its first venture into the realm of brick-and-mortar establishments. Burma Bytes operates as a takeout and delivery hub, utilizing the company’s robust online infrastructure. Menus cover a price spectrum from $2.95 to $20.
Catering Services
On the B2B front, DoorDash extends its services to catering. This aspect works similar to its restaurant-to-customer model, with merchants enrolling to accept orders from corporate customers seeking catering solutions.
Advertisement
DoorDash earns by providing advertising space in its inventory. Restaurants seeking premium placement and better visibility have to pay higher costs to achieve prime advertising position.
DoorDash’s Business Model Canvas
Here is the DoorDash business model canvas:
DoorDash’s Customer Segment
DoorDash’s customer segments include:
- Users: Individuals who want the convenience of ordering food online, preferring doorstep delivery and real-time tracking; People who want to dine out without physically going outside; People short on time are looking for food solutions.
- Businesses: Establishments that lack in-house delivery services or aim to access DoorDash’s broad user base.
- Drivers: Individuals seeking flexible employment, adjustable working hours and attractive earning opportunities.
DoorDash’s Value Proposition
DoorDash’s value propositions include:
- Users: Seamless online ordering, AI-powered food recommendations, scheduled deliveries, live order tracking, and a rating system to ensure quality.
- Business: Access to an extended customer pool, streamlined distribution services, a cost-effective means of distribution and a valuable asset for small enterprises.
- Drivers: Flexible working hours, competitive earnings, and gratifying tips.
Doordash Channels
DoorDash communicates through:
- Website – www.doordash.com
- Android and iOS App – Play Store
DoorDash’s Customer Relations
DoorDash maintains customer relationships through the following:
- Active presence on social media
- 24/7 Customer Support
- physical “brick-and-mortar” stores
DoorDash’s Key Resources
Key Resources for DoorDash include:
- Technical infrastructure
- Cooperation with restaurants and stores
- Delivery workforce
- Algorithms and AI Capabilities
Key Activities of DoorDash
Key activities of DoorDash include:
- Efficient delivery operations
- Platform maintenance
- Ongoing software development
- Payment process
- Customer service
- Marketing and Communications
DoorDash Major Partners
Important DoorDash partners include:
- Restaurant
- Store
- Dashers (drivers)
- Investors
- Technology provider
DoorDash’s Cost Structure
DoorDash’s cost structure includes:
- Platform Maintenance Expenses
- Marketing initiatives
- Customer Acquisition Cost (CAC)
- Legal expenses
- Payment processing fee
- R&D cost
- Customer support outlay
- Human Resource Expenses
SWOT Analysis of DoorDash
Below, is DoorDash’s detailed SWOT analysis:
DoorDash Strengths
- Leadership: A major player in both the online food delivery and convenience delivery sectors.
- Customer base: Boasts of a vast network consisting of over 450,000 restaurants, 20 million customers and one million riders.
- Diverse value proposition: Provides restaurant partners with a variety of products beyond food delivery, such as marketing support, payment processing, and storefront integration.
- User-Friendly Platform: Provides an intuitive app and website, which enables users to place orders with ease.
DoorDash Weaknesses
- High commission: Partners, especially small businesses face high commission cost ranging from 15% to 30%.
- High Delivery Charges: Compared to competitors, the delivery charges can be relatively high for the users.
- Limited operating history: Being in existence for less than a decade brings some inexperience to the market.
- Customer Relations Issues: Frequent occurrence of canceled orders and unresolved customer complaints.
- Competitive Challenges: There are strong competitors in the market, and low switching costs pose a challenge.
- Legal Vulnerabilities: Engaged in various legal proceedings and lawsuits related to merchant acquisitions, quality control, and Dasher relationships.
DoorDash Opportunities
- Growth Potential: Potential to expand our reach in existing countries and enter new ones.
- Expansion: Ability to expand your partner network by offering lower commission rates.
- Business model enhancements: As a relatively young company, there is room for quality improvement to reduce losses and increase profitability.
- Diversification: Opportunity to expand services beyond current delivery offerings into other logistics sectors.
DoorDash Threats
- Public scrutiny: ongoing lawsuits and legal risks from pressure to classify drivers as employees.
- Employment Changes: Mandating drivers to become full-time employees can have a significant cost impact.
- Constant Competition: Despite being a market leader, the presence of strong competitors and potential new entrants remains a threat.
- Economic Challenges: Risk of facing net losses during financial crisis or economic downturn.
Final Words
Through strategic investments in logistics and operational systems, DoorDash has established itself as a leading force in food and convenience store delivery services. The company’s proactive approach and adoption of cutting-edge technologies, including self-driving cars, indicates a strong intention to aggressively expand its delivery market presence. This puts DoorDash at the forefront of innovation and customization in the emerging landscape of delivery services.
