food delivery app
Posted on: | Posted by: Rahul

How DoorDash Works: Business Model and Revenue Model

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 home which would be impossible without app technology. It has not only benefited the customers, but these apps have helped restaurants gain market share as well as visibility with minimum investment and effort.

One such app is DoorDash, 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:

o DoorDash was founded by Andy Fang, Stanley Tang, Evan Moore & Tony Xu.

o It was established in the year 2013

o DoorDash has its headquarters in California and San Francisco

o Its funding has reached to more than $700 million as of 2019.

o Currently DoorDash is valued at approx $13 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 Door dash has filed to go public.

  Doordash funding data  

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 is only going to 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 expected to reach USD 164.5 billion by 2024, exhibiting a CAGR of 11.4% during 2019-2024.

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, or 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 own vehicles.

THE 4-STEP MODEL: How Does Doordash work

1) Selection of the order: 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 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 helps 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, he/she should understand the revenue model of DoorDash thoroughly. Doordash generates revenue through different channels mentioned below:

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

ü Marketing of the restaurants: Apart from 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.

ü 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 have any idea how DoorDash makes money.

Future PROSPECTS OF DOORDASH

DoorDash, with making intelligent use of technology, is also expanding business aggressively. To continuously improve its food delivery services, it has developed a feature known as Delight score which lets customers rate the quality of food, delivery experience, and their expectations of the service. As already mentioned it has already forayed into 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 and things look brighter for DoorDash in the future.

Description of other on-demand food delivery services

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

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

Ø Zomato food delivery app has a partnership 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.

Ø Swiggy is another top-rated mobile app, based in Bengaluru, India. With maintaining its global presence, Swiggy has been rated at 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 are only going to 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’. ‘Revenue models’- the ways to generate revenue, differ from provider to provider but ‘Technology’ is common, whether it is a DoorDash, UberEats, Zomato, Swiggy, or a FoodPanda. The future of online food delivery is very bright and such delivery platforms are only going to evolve with advances in technology as the food market is never short of demand.

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