How DoorDash is propelling its growth:
- Increasing average order volume via DoubleDash – where users can add items from nearby stores to their order at no extra cost – and using incentives to boost average spend.
- Positioning itself as an all-inclusive partner to merchants – from access to capital and logistics.
- Unleashing new partnerships with DashPass, which offers unlimited deliveries with USD 0.00 delivery fees from eligible restaurants. “If you’re able to get someone on DashPass, the number of times they use the app is somewhere in the order of 3-4 more times per month,” the specialist said.
- Using grocery, DoorDash’s biggest opportunity, as a hook for new users. However, we heard grocery operations are tough because of the variable cost structure. “The only way you can make grocery work in the near future is you use grocery as a tool to get people using your platform, but you actually make your money from advertising.”
- Lobbying at different state levels to open up alcohol delivery, which our expert believes will “be a growth engine”.
- Optimising routes to reduce costs amid regulatory pressure on rider pay rates.
Although DoorDash faces stiff competition against Instacart on the grocery side, the expert does not believe the latter has a permanent moat here. “DoorDash is chipping away at it, but it’s not immediate.” In fact, they anticipate that in 5-7 years, DoorDash could “leapfrog” Instacart. “Instacart doesn’t have the benefit of having enough touches,” they said. “DoorDash can expand to grocery and other verticals more easily than someone like Instacart can expand to prepared food or other verticals there.”
The expert also said that DoorDash has an inherent advantage that Instacart is “fighting uphill” against: “DoorDash’s cash cow is a better cash cow. The prepared food business is a better cash cow than the grocery business.” Meanwhile, DoorDash is able to take advantage of Instacart grocery partnerships expiring.
DoorDash’s management has a “1% better every day mindset”, the expert also said, with the company seeing experiments as critical to its evolution. Indeed the company has its sights on becoming an “everything app” and at the end of July it was reported that it is looking to speed up ordering and improve recommendations with an AI-based chatbot.1https://www.bloomberg.com/news/articles/2023-07-27/doordash-is-working-on-an-ai-chatbot-to-speed-up-food-ordering?leadSource=uverify%20wall
A development that could “potentially throw a wrench” is if Amazon made a big move in the space by acquiring a player like Grubhub. “All of a sudden, they buy all these merchant relations and drivers and at least some customer base, and then they layer on their Amazon magic.”
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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