Hungry? Don’t have food in the kitchen? Don’t want to step out of your comfy, warm home? DoorDash got you covered with only a few clicks, in under 45 minutes.
DoorDash is a technology company that enables customers to order meal from their favorite local merchants online and have it delivered to their doors in less than 45 minutes. Since its founding in 2013, the startup has rapidly expanded in 23 major markets in the US and Canada, including Boston, San Francisco, Chicago, Los Angeles and Toronto.
Its mission? To help small businesses grow, offer affordable convenience to consumer, while at the same time give underemployed people flexible work. The VC-backed company has enjoyed rapid growth, raising nearly $60 million to date, with current fundraising talks giving it a valuation of around $1 billion.
A business to connect demand and supply
Part of the rapidly growing on-demand economy, DoorDash adds value to the “last mile” of the same-day delivery business. The company aims to leverage the inventory of merchants built-in naturally within cities, using an “army” of delivery workers to distribute it at the appropriate time to the right consumers based on a dynamic demand.
It offers consumers a diverse selection of restaurants that goes way beyond pizza or Chinese food. Merchant options, that are located in the consumer’s vicinity can range from upscale restaurants to fast food chains. After ordering following a few simple steps, the customer can access real-time order status information, always knowing the estimated delivery time. Furthermore, he can see when the restaurant started preparing the food, when the delivery worker arrived at the merchant, when he/she left the restaurant, or if there’s a delay with the order.
Merchants get an easy way to expand their reach, boost their to-go business and quickly reach new demographics. Contrary to many of its competitors, DoorDash has partnered with many restaurants that do not have a delivery service. It gives them the ability to outsource this service while simultaneously add an online ordering option.
DoorDash uses the delivery fee it charges customers (usually $6) in order to compensate the delivery workforce. The company earns revenue by charging a commission to restaurants based on the order’s value (estimated to be in the 20% range).
DoorDash has tens of thousands of delivery workers, but only employs around 120 people. Due to the limited peak times of food delivery, using contract workers as delivery workers and paying them per job made the most sense. DoorDash uses the contractor model, first popularized by Uber. “DoorDashers” as they are called, can earn up to $25 an hour and get to keep 100% of tips.
DoorDash heavily leverages logistics algorithms in order to match drivers to delivery orders and root them to merchants and customers. According to founder Tony: “How do you determine which driver should get which order? How do you time it so there’s no wasted time at the restaurant? How do you determine whether or not more than one order should go to a driver? How do you estimate how long it takes to make something?”
The company uses machine learning technology to estimate delivery and execute it in a timely, mistake-free fashion. The driver rooting algorithm helps take the smartest route between shops and the customer’s home. “The dispatch system self-learns and adapts to different variables based on driver inventory, time of day, and expected demand. It also uses a capacity-planning algorithm to ensure that it has the right number of drivers available at any given time”. In addition, DoorDash pulls smart technology to forecast restaurant preparation time, so that drivers don’t show up too early and wait for meals to be prepared, or too late so that food gets cold.
The way ahead
Can DoorDash survive in the super crowded same-day delivery space? Uber and airbnb dominated their respective industries having had the first mover advantage and quickly becoming a market leader. Can DoorDash do something similar? Much will depend on its ability to continue enriching its list of merchants, rapidly penetrate new markets and manage to “enlist” enough DoorDashers to meet the demand.
The company ultimately plans to expand beyond just food delivery. Having built its logistical delivery infrastructure in a given area, it should no longer be limited to delivering only meals. With so many competitors around the country, offering a holistic same-day delivery service with a wealth of options might be the answer.