How DoorDash Works: Business Model and Revenue Model

Updated On: August 24, 2022

Updated By: appsrhino

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Ordering food through online services is easier than ever. All you need to do is to download an app, select the food item you want to have, and it will reach your doorstep within no time. Customers get access to multiple restaurants' menus from the comfort of their homes which would be impossible without app technology. It has benefited the customers, but these apps have helped restaurants gain market share and visibility with minimum investment and effort.

One such app is DoorDash, which started in 2013 to deliver logistics; it has since transformed into a very successful food delivery service operating primarily in the US and Canada.

ABOUT DOORDASH

 

DoorDash currently operates in over 4000 cities and has more than 340000 partner restaurants and food joints across the US and Canada.

Some facts and figures about DoorDash:

  1. DoorDash was founded by Andy Fang, Stanley Tang, Evan Moore & Tony Xu.
  2. It was established in the year 2013
  3. DoorDash has its headquarters in California and San Francisco
  4. Its funding has reached more than $700 million as of 2019.
  5. Currently DoorDash is valued at approx $72 Billion.

In 2018, Doordash ventured into the grocery delivery business by partnering with Walmart.

In 2019, to help expand its business, Door dash announced a partnership with Mercato- an eCommerce company.

Recently Doordash went public in December 2020 and its shares surged 80% on listing. It was valued at 72 billion dollars in 2020 before IPO and currently valued at 55 billion dollars after the IPO.

Doordash has also become the largest online food delivery company in the US in terms of market share and annual revenue. It commands an astonishing 45 percent market share, enrolled 390000 restaurants, 20 million users and 5 million subscribers. The revenue crossed 2.9 billion dollars. 

The data is self explanatory of the blazing success that DoosDash is today.

MARKET SIZE: One of the Contributors to the success of DoorDash

 

The reason behind the popularity of DoorDash or such online delivery services is simple- People find it more convenient and time-saving to get their favorite meal delivered at their doorstep rather than moving out. What's even more interesting is that the market will only grow according to these figures.

The global online food delivery market attained a value of US$ 84.6 Billion in 2018. It reached a value of US $96 billion in 2019 worldwide and is expected to reach USD 164.5 billion by 2024, exhibiting a CAGR of 11.4% during 2019-2024.

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BUSINESS MODEL: How DoorDash Works?

 

DoorDash operates on a three-tier system: Users, Restaurants, and deliverymen, commonly known as 'Dashers.' These tiers are explained in detail below:

Users: Customers who use the DoorDash app to order food. These include all segments such as college students, corporates, and businesses, employees who want to save time in eating hours. It even consists of the regular non-working people who want a break from everyday cooking.

Restaurants: Various restaurants have various reasons for coming on board with Doordash, such as food joints that do not have sitting facilities get to grow their business, restaurants that do not offer home delivery have an added dimension through partnership, and the foremost reason for most of them is the reach, and brand visibility that Doordash offers through its tech, with minimal cost and effort is a game-changer

Dashers: These are the drivers employed by DoorDash. People looking for a job with flexible timings and reasonably good income from tips (on average, a 'Dasher' earns 600$ in tip a year) opt for this role contributing to the value chain. The only condition is that they should have their vehicles.

THE 4-STEP MODEL: How Does Doordash Works

 

1) Order Selection: The process begins with a customer who chooses a restaurant with his choice of food item through the DoorDash app and places an order.

2) Payment: The customer can pay for the order either online or, through cash on delivery.

3) Track order: Once the order is confirmed by the restaurant, the DoorDash app shows the progress of the order. A user can keep track of his order to have an idea of when he will receive his delivery.

4) Delivery: Once the order reaches the user, he can tip the dasher if he wants to. The tip is a 100% share of the dasher.

The user is expected to rate his experience with the app and provide feedback if he/she desires. Such reviews not only help DoorDash improve its services but also help in maintaining a cordial relationship with the customer by addressing their concerns/complaints if any.

REVENUE MODEL: How DoorDash Makes Money?

 

Any entrepreneur who wants to start an online food delivery business should understand the revenue model of DoorDash thoroughly. Doordash generates revenue through different channels mentioned below:

Commission: DoorDash charges a small percentage of the order value from the restaurant on each order placed by the customer. The portion of the commission is around 20%.

Marketing: The restaurants: Apart from the commission, DoorDash also charges the restaurants for their advertising and marketing. For instance, to appear on top of the user's search for a food item, the restaurant pays a commission to DoorDash.

Delivery charge: DoorDash, through its 'Dashers,' charges a delivery fee of $5 to $8 per order, depending upon the area and distance traveled.

Reading the above points, now you know how DoorDash makes money.

DoorDash Major Competitors

 

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  1. UberEats: UberEats is one of the most prominent players in the industry.Although UberEats has not been successful in every country it has entered in but it is the most formidable competitor of DoorDash. UberEats also bought Postmates, another competitor of DoorDash for 2.4 billion dollars.
  2. GrubHub: owned by JustEat. GrubHub had the most market share in 2015 and has been on a constant decline since then. One of the prominent reasons being the rise of competitors like Doordash. Needless to say, it still remains a threat to DoorDash.
  3. Postmates: Started in 2011, Postmates has steadily expanded its operations to more than 2000 cities in the US. Postmates has been able to maintain constant market share in the last 5 years. With vast experience and backing of UberEats, Postmates might spring up a surprise anytime and capture the market back from Doordash.

Source: Mckinsey

FUTURE OF DOORDASH

 

DoorDash is making intelligent use of technology and is also expanding business aggressively. It has developed a feature known as Delight score to improve its food delivery services continuously. It lets customers rate food quality, delivery experience, and service expectations. As already mentioned, it has already forayed into the grocery and eCommerce business to expand its reach and customer base. Recently, DoorDash overtook the leader to register the highest sales by an online delivery platform. Things look brighter for DoorDash in the future.

Other on-demand Food Delivery Services

 

Given below are some of the popular online food delivery services:

FoodPanda: started in 2012 and covered 41 countries under its operational food delivery services. The company is headquartered in Berlin, Germany. FoodPanda collaborates with approximately 40,000 local restaurants in several cities providing on-time delivery.

Zomato: food delivery app partners with a list of top-most restaurants. Zomato is also a social network-friendly app showcasing its presence on Twitter or Facebook. It keeps updating the Zomato app, making the customers access new features like "one search fits all," "sorted and how," "all answers under one umbrella," etc.

Swiggy: is another top-rated mobile app based in Bengaluru, India. With maintaining its global presence, Swiggy has been rated at the top of the list for providing top-notch services to its customers. Swiggy introduced the idea of an app enabling online food delivery services to foodies. Recently, Swiggy brought up a new upgrade, Wallet Function, which allows users to store money and pay during any transactions on Swiggy.

Conclusion:

Online food delivery services are here to stay, and platforms like DoorDash will only grow and expand to newer markets and geographies. The two means that have enabled this revolution in food delivery are 'Refined Revenue models' and 'Technology.' 

Unique Revenue models help generate revenue differ from provider to provider, but 'Technology' is standard, whether a DoorDash, UberEats, Zomato, Swiggy, or a FoodPanda. The future of online food delivery is very bright, and such delivery platforms will only evolve with advances in technology as the food market is never short of demand.

Suppose you are willing to start your own on-demand online food delivery and leverage technology the right way to become the next DoorDash. In that case, we at AppsRhino can set you up for success by delivering a reliable, high-quality, and feature-rich app.

Whose delivery service is faster, DoorDash or Uber Eats?

What is the Development Cost of Food Delivery App Like UberEats?

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