How Does DoorDash Make Money: Business Revenue Model Revealed

How Does DoorDash Make Money: Business and Revenue Model Explained

1955 Views | 5 min | November 7, 2019
How doordash make money

Sudden food cravings can give people tough times. 

What do you do when you crave your favorite ice-cream?  Do you physically go searching for the same or prepare it yourself?  If yes, then maybe you are living behind time. Why go searching for your favorite food or spend hours in the kitchen when you have better options like DoorDash.

According to Forbes, the demand for online food services will keep rising by 20% each year, notching the figure of $365 billion in revenue by 2030. This increase in the popularity of on-demand food delivery services is due to rising consumerism and millennials driving the demand for food at the doorstep. 

Due to these factors, competition in this segment is increasing day by day. Boosted by increasing demand and sales of established players like DoorDash, new entrants are venturing into this tried and tested segment and are doing well. 

If you are also planning to enter into an on-demand food delivery business and wondering “how does DoorDash make money”, this article is for you. An in-depth analysis of the DoorDash Business model can give essential tips and tricks to establish and even successfully expand a new food delivery business. 

So, let’s dig in and explore the success story of Doordash:

DoorDash Stats and Facts: Funding and Major Milestones

  • Founders:  Andy Fang, Stanley Tang, Tony Xu, Evan Moore
  • Launched In: 2013
  • Headquarters: San Francisco, California, United States
  • Valuation:  More Than $10 Billion
  • Funding:  $2 Billion
Doordash Success Timeline

How Does DoorDash Work: Business Model Revealed

Ranked as the leading online food ordering service in the US, DoorDash enables customers to grab their favorite food from a huge selection of local restaurants across 800+ cities in the US and Canada. 

DoorDash’s large scale of operations and the reported success stories of the same makes it an ideal case study. It will be beneficial for any prospective food delivery business to study the business model of DoorDash. 

DoorDash Business model works on the primary goal of customer satisfaction. It provides its customers with the convenience of getting quality food at their doorstep. Also, the local restaurants which lack the delivery service can find new customers through the DoorDash app. 

The food ordered on Doordash is picked up by DoorDash’s Dashers from the selected restaurant and delivered at the customer’s doorstep. These dashers are an important asset of DoorDash making doorstep delivery hassle-free.

The business operates upon the aggregator business model to run its on-demand food delivery service. It aggregates information on the nearby restaurants, their menus, drivers and sells their services to users under its name.

To get an idea of how it provides value to customers and earn profits, have a look on Doordash business model canvas:

Doordash business model canvas

DoorDash app offers a convenient user interface, where one can order food from a wide array of restaurants. The Dashers of Doordash pick up the order from restaurants and deliver food at a place convenient to users. They have to follow these simple steps to order food through the app:

  • Place An Order – Doordash app lets users choose their favorite cuisine from several restaurants around the city. With the option to choose from a number of cuisines and get the desired food at the doorsteps, the user’s convenience in-app is ensured.
  • Make payment – After placing the order online, users make the required transaction. DoorDash then forwards the order to the selected restaurants where the food is prepared and packed to deliver.
  • Track the Order – A Dasher picks up the prepared food from the restaurants. Users can track the food ordered through the DoorDash app so as to get an estimated time of arrival.
  • Get Order at doorsteps – The Dashers then deliver the food ordered at the user’s doorsteps. Users can also tip the Dashers if they want to.

Now that we know what is DoorDash and how does Doordash works, let us try to understand how does DoorDash make money.

Also Read: DoorDash Racing Postmate To Launch Automated Delivery System – Check Their Latest Move!

How Does DoorDash Make Money: Revenue Generation Model

According to research firm Edison Trends, DoorDash has become the top on-demand food delivery platform in terms of share in the consumer spending market, replacing the long-time leader GrubHub. It currently accounts for 35%  of the online food delivery market share in the US. 

Doordash Market Share

In the month of February this year, DoorDash announced that it has successfully raised $400 million through venture capital investors and in the month of may, Doordash business raised $600 million again. 

In these financing rounds, the company was valued at $7.1 billion. Such a successful funding profile of DoorDash make one thing clear that investors are investing resources in food-delivery business because of its demand and potentials it holds. 

It is a well-established fact that DoorDash has been registering a robust positive growth since its inception in 2013. Being a third-party food delivery service, DoorDash works on less ownership model. This means that DoorDash does not own any of the restaurants it provides its customer’s service from. 

Still, it fulfills all of its customer orders which number in lakhs on a daily basis with the least hassle. Then, one might wonder How Does DoorDash Make Money. This makes a case, to study the revenue generation model of DoorDash. Well, there are three major revenue streams for that Doordash relies on to make money and these are:

  • Commission Per Order On every food order placed on the Doordash platform, a percentage commission is charged from the restaurants. It is reported that Doordash charges a 20% commission from the restaurants for every order delivered to the customer from restaurants.
  • Restaurants Utilizing DoorDash for Advertisement – Doordash also run paid advertising and marketing campaigns for the restaurants that want extra exposure. To list a restaurant at the top of its list for any search, Doordash charges a fee that adds to its revenue.
  • Delivery Fee – Delivery charge is another source of DoorDash’s income. The delivery fee is decided based on the distance between the point of pick up i.e. restaurant and the point of delivery to the user. On average it costs around $5-$8 on each order.

All of the above facts we have delved upon clearly show the success of the DoorDash Business model and effectiveness of its revenue streams thus enabling it to continuously expand. But to maintain its current robust growth trajectory it has to remain abreast with the latest technological advancements and thus create new value propositions.

Now that we know how Doordash make money and have a good idea of how on-demand food delivery businesses work, let’s proceed forward and see what the future holds for them.

Food Delivery App Development

Future of On-Demand Food Delivery Businesses

According to a research by Credence Research, the online food delivery market which was valued at US $ 81.56 Billion in 2017, is expected to show a compounded annual growth rate of 9.8% during the forecast period 2018-2026.

This indicates that the future of the on-demand food delivery sector is certainly bright. As more and more customers are loving the convenience of getting food at doorstep with just a single tap on their smartphones, the demand for on-demand food service providers will increase in the future.

However, to become successful, every new player has to come up with a solid business plan taking cues from established players like DoorDash. In addition to this, bringing innovation to the segment in the form of drone deliveries and other methods to reduce operational costs will provide the necessary edge.

Incorporation of the futuristic technologies like Artificial Intelligence to enhance personalization can also prove as a game-changer.

Also Read: On-demand Food Delivery Apps are here to Stay – Mobile Apps like DoorDash Getting $600M Funding is the Proof

Wrapping Up

DoorDash Business model can be a suitable case study for any aspiring entrepreneur willing to enter into the online food delivery segment. 

Insights into this industry clearly indicate that the demand for food delivery services is increasing day by day, fast outpacing the supply. Thus there is a huge untapped market potential for any new entrant to try their hands and become a success in this business. Understanding the DoorDash business model can be a rewarding starting point for your successful entrepreneurial journey.

Doordash like app development

 

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