How does doordash make money

Doordash Business Model: How Does Doordash Make Money In 2023?

Are you in New York and want to have your favorite food in the comfort of your home? You can try DoorDash and get your cuisine delivered to your door (without having to wait for hours)!

But what if you need a dog collar but don’t want to go out? You have nothing to worry about here as well, DoorDash takes care of that too!

How Does DoorDash Make Money?

DoorDash makes money through commissions, service fees, subscription fees, white-label logistics services, advertising, brick-and-mortar stores, and DoorDash storefronts!

Now let’s take a closer look at DoorDash’s business model and its many revenue streams: 

Commissions

Commissions from clients form the major chunk of DoorDash’s revenue. There are various plans offered by DoorDash to clients depending on their business requirements. These commissions can be for listing the business on the platform so that its reach increases and for delivering orders placed by the customers directly from the vendor’s website.

The commissions cover up to 20% of the order charges paid by the customer — Implying that the number of orders placed on the platform decides the amount of money coming in as commission.

Delivery & Service Fees

Being a hardcore logistics company, DoorDash earns a significant part of its revenue from the delivery fee it charges to its customers. Dashers (delivery partners/ DoorDash drivers) also get benefited a lot from the collection of this separate amount.

While placing an order on DoorDash, there’s a certain amount that users pay as a delivery fee. This amount directly falls into DoorDash’s pocket. This fee can go as high as $7 depending upon the order. DoorDash also charges a service fee from customers that are nearly 10% of the order value.

Subscription Service Fees

Subscription schemes are one-time payment deals that give long-term benefits to subscribers. These schemes offer lucrative deals and discounts to the customers who subscribe to them after paying certain charges.

In DoorDash, the most popular of all is DoorPass which the company offers at $10 per month which makes the delivery fee null on every order above a certain amount. Another benefit of DoorPass is the reduction in the service fee. Overall, DoorPass is a good bargain to save money for a frequent DoorDash user!

White-Label Logistics Service

There is a special service offered in the name of DoorDash Drive. Being a logistics company, DoorDash partners with restaurants and convenience stores for delivering their orders to their customers’ homes.

Moreover, the clients can white label or rebrand it as per their own customs. All they have to do to avail of this amazing service is, pay a flat fee as a delivery service charge to DoorDash for every order.

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Advertising

Like every smart company, DoorDash also leverages its platform for making money by posting ads. for other businesses. With the humongous userbase, the app has, businesses are eager to pay for getting promoted on the company’s platform.

According to the Head of the Ads department at DoorDash, Toby Espinosa, in 2021 the ads were able to generate a combined income of nearly $1.5 billion for the clients who opted for them!

DoorDash Storefront

Storefront is an online ordering service offered by DoorDash to its restaurant partners that has been a boon for the restaurants’ sales. It is a one-stop solution that can be easily integrated with the existing restaurant website. It’s totally commission-free and can also be white-labeled by restaurant partners.

Features that it offers include online ordering, management of orders via the DoorDash tablet, enabling ordering via Google Search, and an exploding reach to the public. Clients have claimed that Storefront has boosted their sales like never before.

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DoorDash Brick-And-Mortar Store

Popularly known as DashMarts, these on-ground stores are synonymous with Supermarkets that provide people with the stuff of daily need. In 2020, DoorDash opened 8 DashMarts in the USA across different places.

The DashMarts have proven to be a great relief for the citizens due to the affordable pricing of products and the seamless quality of service they offer. One can sit at ease and simply order stuff needed from the DashMart, through the DoorDash app. The Dasher will get it for you so no need to go out and look for anything!

Also Read:How Does AfterPay Make Money?

Revenue, Funding & Valuation

In terms of finances, DoorDash has been performing exceptionally well — showing the DoorDash business model is beautifully designed!

A company that has not been there for even 10 years in the market is generating huge income and has already acquired popular ventures. With the launch of customer-centric solutions apart from food delivery like DashMart and DashKitchen, the company has succeeded in generating heavy revenue.

As of now in 2022, by the onset of the 4th quarter, the company has already surpassed its past year’s performance. The company earned $4.88 billion in 2021 which was 69% more than the previous year.

The biggest leap in the company’s revenue came in the years 2019 and 2020 when people were locked up in their homes. The company crossed over a whopping $1 billion dollar revenue then!

Source: Business Of Apps

As far as funding and valuation of the company are concerned, the company is currently valued at around $80 billion. The company got listed on the New York Stock Exchange in 2021 and has been performing tremendously.

The company has been funded by big names in the industry like SoftBank, Sequoia Capital, Y Combinator, etc. From $2.4 million in the beginning to $2.5 billion in 2020, the company has raised huge amounts over the years.

Acquisitions Made By DoorDash

For a company born in 2013, it is exceptional to acquire existing ventures across different verticals in order to proliferate its own growth. The top 5 most valuable acquisitions made by DoorDash to date are as follows:

  1. Bbot: A digital ordering service facilitator acquired in 2022, amount undisclosed
  2. Caviar: A food delivery service provider acquired in 2019 for $410 million
  3. Lvl5: A virtual map designing company acquired in 2019, amount undisclosed
  4. Scotty Labs: An autonomous vehicle startup acquired in 2019, amount undisclosed
  5. Wolt: A food delivery company acquired in 2021 for $8 billion

This shows the bustling mindset of the management at DoorDash which has made it capable enough to not only fight competition but also crush them to a certain extent.

One of the primary reasons behind the company’s rapid growth is the ability to acquire budding startups which could become tough competitors later on!

History Of DoorDash

Back in 2012, a group of college mates, Tony Xu, Andy Fang, Stanley Tang, and Evan Moore sensed the need for a doorstep food delivery service. They thought carefully about this idea and worked on a solution for this requirement. Finally, in Jan 2013, DoorDash came into existence as paloaltodelivery.com, an online food delivery app in Palo Alto, California.

Since then the company has undergone various rounds of funding and also acquired many small businesses. The company is headquartered in San Francisco, California, and holds the title of being North America’s no.1 food delivery company.

In 2019, the company surpassed GrubHub to become the most loved food delivery app of Americans. Today, the company has more than 20 million users and half a million merchants on its platform worldwide. Tony Xu, the founder is also the company’s current CEO. DoorDash claims to operate in 7000+ cities across 3 continents and 5 countries namely, the USA, Canada, Japan, Australia, and New Zealand.

The company has achieved many feats since its birth but for once, in 2020, it was also involved in a scandal for spoofing the Dashers (a.k.a. delivery partners/drivers) with their tips. Later the company clarified this matter and amended its policy.

Top Competitors of DoorDash

It won’t be groundless to claim that DoorDash has hardly allowed competition to affect its growth. Over the past 10 years, since its launch, the company’s growth has been meteoric. The founders have been very persistent in the terms of operations and setting up the right business model which has made the company rise to such a level.

Today, DoorDash is the best choice for ordering stuff. A couple of years back, it had beaten market veterans like GrubHub and UberEats with respect to market capitalization. However, if we are to list down the could be competitors of DoorDash, considering the bloom of similar startups worldwide recently, they are:

1. UberEats

A subsidiary of the conglomerate, Uber Technologies. It was started in 2014 and used to be the leader in the online food delivery space.

Its revenue last year was around $8 billion. It is headquartered in San Francisco, USA, and operates across 6000 cities in 45 countries in the world. It’s the toughest rival of DoorDash especially in the USA due to its strong brand value among the people.

2. Grubhub

Founded in 2004, it’s one of America’s oldest companies in the food delivery service sector. Given its legacy, it was acquired by the Dutch company Just Eat Takeaway, last year. Before that, it recorded a revenue of $1.8 billion.

Grubhub is headquartered in Chicago, USA, and has a presence in around 25 countries in the world. Its business model is quite the same as that of DoorDash but it provides better compensation to its delivery partners.

3. Postmates

Another popular online food delivery company launched in 2010. It is headquartered in San Francisco. DoorDash also reached out to Postmates back in 2018, to compete with UberEats. Ironically, Postmates was acquired by Uber in 2020 for a whopping sum of $2.65 billion. 

Postmates generated a revenue of $1 billion in 2018. The company had a good grasp of the local food industry and operated in around 3000 cities in America.

4. Waitr

A unit of Waitr Holdings Inc, it is one of the few companies that have not been taken over by any whale in the industry. Launched in 1999, in New York, USA, the company has been in the industry for quite a long time now.

The company has been unable to put up a fight against the giant players and is far behind them in terms of revenue. In 2021, the total revenue was around $185 million. However, the management is ambitious about the company’s growth.

5. Amazon Fresh

Not a member of the food delivery space but yet a tough competitor, Amazon Fresh offers its services as a grocery delivery company that aims to reach the stockpile of every house.

Being a subsidiary of another conglomerate, Amazon, Amazon Fresh is the leader in the online retail business in not just America but in other countries too. It was launched in 2007, in Seattle, USA, and operates in 20+ countries across the world including high-density regions like India.

DoorDash is an exemplar for the startups of today. Being able to achieve so much in a such short span of time is absolutely miraculous.

With its existing presence in 5 countries, DoorDash Inc. aims at expanding its operations to bigger markets of the world like India, China, etc. Given its past performance, no doubt that it would be able to provide remarkable services to the people of these regions!

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