DoorDash is a food delivery company that has been a prominent name in the US market. The company deals with local restaurants to deliver food to customers. On the other hand, it also hires contractual drivers to operate when needed. The company provides a platform where these parties can interact. In exchange, it also charges money from various transactions.
What is DoorDash?
DoorDash started its operations in 2013 under Tony Xu, Stanley Tang, Evan Moore and Andy Fang. They were alumni of Stanford and sought to solve their issues with food delivery services. At the time, the founders could only access apps that listed various local restaurants. However, these apps did not offer delivery services. Instead, they relied on those restaurants to deliver food to customers themselves.
Due to the limited options, the market was open to new ideas. The founders realized this opportunity to enter the field and excel at it. Initially, they started a platform under PaloAltoDeliver.com. However, it was a test project to see how their idea fared in a condensed region. The website received hundreds of orders, which initiated the owners to proceed with their project.
The founders rebranded their website to DoorDash and joined startup accelerator Y Combinator. Since they had a unique idea for an unexplored market, the platform didn’t have a challenging time there. Soon, they laid the foundation for DoorDash and started expanding their business. In a couple of years, the company served in over 18 cities in the US. At the same time, it increased its valuation in the stock market.
At the same, the company faced some challenges in its business. Like other similar companies, it received various lawsuits for mistreating its drivers as contract workers. DoorDash had trouble with these issues, although they were not specific to the company. However, it impacted DoorDash, which caused a financial down round of DoorDash in 2016. Nonetheless, the investors supported the company during those times.
In 2018, DoorDash also received $535 million in investments from Softbank. This finance allowed the company to expand its operations even further. At the same time, DoorDash achieved over 34% market share in the US by 2019. At the time, it was the highest-ranked company in terms of customers served. The company also used this opportunity to expand its operations to other markets.
Since then, DoorDash has kept growing its business in various aspects. Currently, DoorDash is the leading name in the food delivery market in the US. The company controls over half the transactions, while the competitors share the rest. It also operates in over 4,000 cities across the US, Canada and Australia. Similarly, DoorDash employs over 200,000 drivers across these markets.
How does DoorDash work?
DoorDash works in many ways. The company allows customers to browse various restaurants and place orders with them. Usually, users can achieve this through the DoorDash app available on several platforms. Later, they can search for their favourite restaurants and order their desired items. Once they decide on their order, they can use the app to place that order.
Before ordering food through the DoorDash app, users must create an account on the platform. This process requires them to register on the app through the register feature. Overall, the process does not require significant time and effort. Users can get started on the platform without much hassle. Once users have their accounts, they can place orders online with their favourite restaurants.
Once users place an order, DoorDash contacts restaurants and food delivery personnel. Restaurants get the details from their portals and start working on them. The DoorDash app provides users with an estimate of how long it will take to get their orders delivered. On the other hand, it also sends a delivery worker to pick the orders items and deliver them. DoorDash has invested in its platform to make this process seamless.
In some cases, DoorDash also provides kitchen space for restaurants to focus on preparing delivery food. These spaces offer an efficient place for restaurants to make the process more prompt. Either way, once restaurants hand over the food to delivery workers, their job gets completed. From there, those workers, also known as Dashers, take over the process. Dashers ensure the delivery happens promptly.
Once the food gets delivered to the customer, the order becomes complete. In the meanwhile, the company pays several parties. This payment comes from the money it collects from users when they place orders. Once DoorDash receives the amount, it reimburses the restaurant for its food. At the same time, the company compensates the delivery personnel involved for their role in the process.
What is the DoorDash business model?
DoorDash uses an e-commerce business model to provide services through the internet. The company offers its app for download through two app stores. Consequently, users can get these apps and start using their platform. However, the e-commerce business model does not explain the primary operations of DoorDash. The company uses a type of e-commerce business model prevalent in its sector.
DoorDash primarily uses a C2C business model. As mentioned above, the initial idea for the company was to connect users with restaurants. DoorDash provides a platform where users can order food online. This order reaches restaurants that prepare the food and make it ready for delivery. Therefore, the user acts as the consumer in this model. The restaurant, on the other hand, is the customer.
DoorDash also introduces another party to the business model. As mentioned above, these are Dashers or delivery workers. These workers work for DoorDash and facilitate the transaction between restaurants and users. In exchange, they receive a commission from the company. Another source of income for Dashers is tips received from the consumers. However, this income isn’t a part of the DoorDash business model.
DoorDash uses a similar business model as most of its competitors in the same industry. However, it provides more refined services, which users prefer. The DoorDash business model has also been one of the primary reasons why the company has been successful. Despite being highly imitable, DoorDash has specialized in this business model.
How does DoorDash make money?
DoorDash makes money from various sources. An explanation of each of those is as follows.
Commissions for deliveries
The primary income source for DoorDash is the commission it charges on every delivery. The company makes money for every order processed through its platform. In exchange, it charges restaurants a variable amount. The company offers a tiered commission structure. Under this structure, it charges restaurants 15%, 25% or 30% commissions. However, these plans also come with added features.
DashMart
DoorDash makes money from its DashMart product. When a user orders a convenience product, the company charges a commission for each order. DashMart partners with various well-known names, for example, 7-Eleven, Walgreens, CVS and many more. In exchange, DoorDash charges commissions, although these are lower than the primary service.
Delivery and service fee
DoorDash also earns money from customers directly through delivery and service charges. These charges apply to all deliveries. However, the restaurants do not bear these expenses. Instead, DoorDash charges its users these fees. DoorDash delivery fees are low, falling between $6-$8. Similarly, services fees come as a percentage of the order amount.
DashPass
DashPass is a DoorDash product that offers subscription services to its customers. This service allows users to save money on delivery and service fees. However, it comes with a subscription fee of $9.99 per month. On top of that, it only applies to orders above $12. While these savings aren’t high, they can be substantial for regular users.
Drive
DoorDash has expanded its business to include logistic services. The company offers other restaurants to use DoorDash services. However, these services are not similar to food delivery. Instead, it seeks to serve businesses that generate demand through their own platforms. In exchange, DoorDash charges them a fee for every order.
DoorDash for Work
DoorDash for Work is a service that the company offers. Through this service, companies can subscribe their employees to DashPass. This service aims to help employees who work from home due to the pandemic. In exchange, DoorDash makes money from the subscriptions from those companies. Similarly, it includes various fees for all the orders.
Conclusion
DoorDash is the most prominent name in the food delivery industry in the US. The company has been on top of the market for a long time. Initially, its services only consisted of food delivery. However, DoorDash has expanded its business beyond that. DoorDash’s business model includes various income sources. The company makes money from all of these sources.
