DoorDash, Inc. is an American technology company that operates a food delivery and logistics service. It facilitates on-demand ordering and delivery of food from restaurants to customers via its website or mobile app. Since its founding in 2013, DoorDash has grown rapidly to become the dominant player in the online meal delivery market, with a 59% share as of March 2022.
The company went public in December 2020 and currently trades on the New York Stock Exchange (NYSE) under the ticker DASH. As of July 20, 2022, it had a market capitalization of $25.901 billion, trading at a day’s range of $72.35–$75.11 per share. The company has its headquarters in San Francisco, California, with operations in 4,000 cities across the US, Canada, Japan, Germany, and Australia.
As a leader in the food delivery market, DoorDash isn’t without its share of challenges. For instance, it faces allegations of antitrust price manipulation, misclassifying workers as independent contractors, and using tips to subsidize delivery driver wages. Moreover, the company hasn’t made any profits since its founding, with 2021, 2020, and 2019 losses amounting to $468 million, $461 million, and $668 million, respectively.
While the company strives to maintain its top position, it must do so in the face of intense competition from fellow on-demand food delivery services like GrubHub, Postmates, and Uber Eats. Nevertheless, DoorDash’s ever-growing customer base, merchant network, and revenues suggest that it is well-positioned to compete in the long run.
In this DoorDash SWOT analysis, we’ll examine the company’s business model, finances, and competitive position using the SWOT framework.
Bottom Line up Front
DoorDash is the market leader in online food delivery, with a 59% share as of March 2022. Given its impressive scale and network, the company has a strong competitive position. However, it faces some notable challenges, including allegations of antitrust price manipulation and worker misclassification. While it hasn’t been profitable since its founding, DoorDash’s growing customer base and revenues suggest a company with long-term potentia.
DoorDash Business Model
DoorDash uses the marketplace business model. The company connects customers with local businesses, such as restaurants and grocery stores. Customers order food and other items through the DoorDash app or website and pay a delivery fee, service fee, and small order fee. The company then uses this customer order to route Dashers (the name of its contracted drivers) to pick up and deliver the items.
Other revenue sources include commissions from merchants, advertisements, and subscription fees. The company also offers a DashPass subscription service that gives customers free delivery on orders over $12 from select merchants and other benefits such as no peak-hour pricing. While its SaaS platform is free for merchants, restaurants that want a personalized ordering and delivering experience pay a monthly software fee.
To expand its scope and customer base, DoorDash has made several acquisitions over the years. The most notable include Caviar (a food delivery service for high-end restaurants), Scotty Labs (a teleoperation company that enables autonomous vehicles to be remotely controlled), and IvI5 (a route-planning software company). These acquisitions indicate the company’s growth strategy and commitment to investing in new technologies that can improve its delivery services.
DoorDash Financial Overview
Wall Street loves a good growth story, and DoorDash is no exception. The company’s stock surged nearly 85% on its first trading day above its $102 per share IPO price. This surge gave it a market value of about $60.2 billion, far above its last private valuation of $16 billion in early 2020. It raised $3.37 billion, making it one of the largest US tech IPOs in 2020.
DoorDash’s strong public market debut came on the back of strong financials. Before going public, the company generated $885 million in 2019 revenues, a 204.12% increase from 2018. As the Covid-19 pandemic led to a surge in demand for food delivery services, DoorDash’s revenues skyrocketed, reaching $2.886 billion in 2020, a 226.1% YoY increase. This rapid growth continued throughout 2021, with DoorDash reporting $4.888 billion in revenue for the entire year.
While we can attribute its strong growth to the pandemic, normalcy is slowly returning. Still, the company outperforms analyst expectations, with its Q1 2022 revenue hitting $1.456 billion, up 35.1% YoY. Despite this strong growth, DoorDash is yet to achieve profitability.
Except for FY2020, its net income (loss) is constantly increasing. In 2019, it reported a net loss of $668 million (up 222.17% from 2018), followed by a $461 million net loss in 2020 (down 30.99%) and $468 million in 2021 (up 1.52% from 2020). The first quarter of 2022 net loss was $167 million, an increase of 12.9% from the same period last year. Customer acquisition costs are the primary driver of these losses. Moreover, DoorDash competes in an industry that sells largely undifferentiated services.
Essentially, a customer will buy from DoorDash instead of Uber because it offers low prices, forgetting that Uber Eats has lower delivery fees. While the merchant benefits from this race to the bottom, it erodes any competitive advantage one delivery service has over another. Eventually, the only thing left is a fight for market share, which requires deep pockets.
DoorDash SWOT Analysis
The following is a DoorDash SWOT analysis examining the company’s strengths, weaknesses, opportunities, and threats. For investors looking to buy DoorDash stock, this analysis provides valuable insight into its current business position and prospects.
- Market Leader
DoorDash is the market leader in the US food delivery industry. According to Statista, it holds 59% of the US food delivery market share as of March 2022. This figure is more than twice as much as its nearest competitor, Uber Eats, which has 24% of the market. Moreover, it ranked second behind Takeaway.com in the fastest growing online marketplace globally by revenue from 2019 to 2021, with a CAGR of 252% during the period.
- Strong Brand Recognition
DoorDash has built a strong brand over the years. It is one of the most popular food delivery apps, with an iOS App Store rating of 4.8 out of 5 stars from over 14.3 million ratings and a Google Play Store rating of 4.6 out of 5 stars from over 2.7 million ratings. Given its stature, DoorDash can attract top talent and the best merchants to its platform.
- Strong Networks of Merchants and Dashers
DoorDash has a strong network of merchants and dashers. As of December 2020, the company had over 450,000 active merchants and more than one million dashers on its platform. Although other companies such as Uber Eats and GrubHub have a comparable number of merchants, DoorDash’s dasher network is much more extensive. The scale and reach of its merchant and dasher network ensure that it can quickly and efficiently deliver customer orders.
- First Mover Advantage
DoorDash was one of the first companies to enter the food delivery market. It launched in 2013, years before its closest competitor, Uber Eats (2014). DoorDash solidified its position as a market leader through a progressive and aggressive expansion strategy. In some major markets, such as New York City, DoorDash achieved a market share of over 70% by 2019.
- Strong Financial Position
DoorDash is one of the best-funded companies in the food delivery industry. To the date of this writing, it has raised over $2.5 billion in funding from some of the world’s leading venture capitalists, such as Sequoia Capital, DST Global, and SoftBank Vision Fund. At the end of FY21021, the company had $3.757 in cash and no debt. This solid financial position allows it to invest heavily in marketing and expansion without worrying about profitability in the near term.
- Innovative Business Model
DoorDash’s innovative business model gives it a competitive advantage over its rivals. It uses a restaurant-to-customer (R2C) delivery model in which it contracts with restaurants to deliver their food to customers. The company does not prepare or cook food itself. This R2C model allows it to keep its costs low and avoid investing in expensive kitchen infrastructure.
- Advanced Technology
DoorDash uses machine learning and artificial intelligence to optimize its food delivery operations. The company’s proprietary DashMart technology helps it source inventory from nearby merchants to fulfill customer orders quickly and efficiently. Moreover, its artificial intelligence-powered routing algorithm helps dashers to make deliveries in the shortest possible time.
While it has a strong financial position, DoorDash is not profitable. If the trend continues, its cash reserves will eventually run dry. Investors may lose confidence in the company, and it may have to raise more money at unfavorable terms. Moreover, DoorDash may have to cut back on its marketing and expansion activities to conserve cash.
- Limited Presence outside the US
DoorDash is a US-based company with a limited international presence. It’s available in only four countries outside the US: Canada, Australia, Germany, and Japan. We can say that the company has a global presence, but its international operations are minimal compared to its domestic business. Eventually, DoorDash will need to expand its international footprint to sustain its growth.
- Class Action Lawsuits
Several class action lawsuits have been filed against DoorDash in recent years. The lawsuits allege that the company misclassified its workers as independent contractors and denied them benefits such as minimum wage, overtime pay, and expense reimbursement. If DoorDash is found liable, it may have to pay hefty damages. Violating labor laws could also lead to regulatory scrutiny and fines.
- Negative Publicity
DoorDash was once accused of withholding tips from its workers. The company changed its policy after the outcry but had already damaged its reputation. Other such as antitrust price manipulation and data breach controversies, affected the company’s reputation. Unfavorable publicity could lead to customers switching to its competitors.
- Expansion into New Geographies
DoorDash has a strong presence in the US but is available in only four countries outside the US. There is a significant opportunity for the company to expand its international footprint. DoorDash can leverage its experience in the US market to enter new markets quickly and efficiently. Moreover, the food delivery market is still in its early stages of development in many countries, providing a significant growth opportunity for DoorDash.
- Increasing Adoption of DoorDash Drive
DoorDash Drive is a service that allows restaurants to use DoorDash’s delivery fleet to make their deliveries. The service is currently available in only a few markets but has significant potential. Drive helps DoorDash to differentiate itself from its competitors and expand its addressable market. Moreover, it provides an additional revenue stream for the company.
- Entering Into New Verticals
DoorDash is currently focused on food delivery but has the opportunity to enter into new verticals such as grocery delivery and pharmacy delivery. There is a growing demand for such services, especially in the US, as customers are looking for ways to avoid going out in public during the pandemic. Entering into new verticals would help DoorDash to grow its revenue and market share.
- Partnerships and Acquisitions
While DoorDash is the leader in the US food delivery market, it faces intense competition from its rivals. One way to stay ahead of the competition is to enter partnerships and make acquisitions. For instance, DoorDash partnered with Walmart to offer grocery delivery in the US. The partnership helped DoorDash to expand its customer base and increase its revenue. Similarly, DoorDash’s acquisition of Caviar, a high-end food delivery service, enabled it to enter the premium segment.
- Intense Competition
The US food delivery market is highly competitive and is dominated by DoorDash, GrubHub, Uber Eats, and Postmates. These companies are all vying for market share and are engaged in a fierce price war. This price competition will likely continue in the future, which would eat into DoorDash’s margins. Moreover, the entry of new players, such as Amazon, into the market could intensify the competition.
- Economic Downturn
DoorDash operates in an industry that depends on discretionary consumer spending, which makes it vulnerable to economic downturns. Depending on the severity of the economic recession, it could decrease demand for DoorDash’s services. For instance, during the 2008 financial crisis, there was a significant decline in consumer spending, which adversely affected the restaurant industry.
- Legal and Regulatory Risks
DoorDash is subject to several legal and regulatory risks. For instance, it is currently facing lawsuits over its tipping policy. Moreover, the company is also subject to regulations regarding the classification of its workers. If DoorDash cannot comply with these regulations, it could face significant fines and penalties.
Below are some of DoorDash’s main competitors:
GrubHub is a US-based online food delivery company founded in 2004. It connects customers with local restaurants and delivers food to their doorstep. It’s a direct competitor of DoorDash and is the third-largest food delivery company in the US.
2. Uber Eats
Uber Eats is a food delivery service operated by Uber. Unlike DoorDash, it enjoys the benefit of Uber’s massive customer base and extensive network of drivers. Since its launch in 2014, Uber Eats has quickly become one of the leading players in the food delivery market. The company is the second-largest food delivery service in the US.
Postmates is a US-based on-demand delivery company founded in 2011. It delivers food, groceries, and other items from local merchants to customers’ doorsteps. The company operates in over 3,500 US cities and has partnerships with over 250,000 merchants. It differentiates itself from DoorDash by offering delivery from a broader range of merchants, including convenience stores and pharmacies.
Waitr is a food delivery service founded in 2008. It doesn’t have the same scale as DoorDash, GrubHub, or Postmates and only operates in a few US states. However, it identified a niche opportunity in smaller cities and rural areas where these more prominent players don’t have a presence.
DoorDash SWOT Analysis (FAQs)
Question: Who is DoorDash’s biggest competitor?
Answer: UberEats is DoorDash’s biggest competitor, with a 24% market share, compared to DoorDash’s 59% market share. Other major competitors include GrubHub (14%) and Postmates (1%). The remaining 1% of the market is split between smaller players like Waitr.
Question: What is DoorDash’s competitive advantage?
Answer: DoorDash’s competitive advantage lies in its massive scale. It operates in four countries and over 3,000 cities. Moreover, it has partnerships with over 400,000 restaurants and over one million drivers. Moreover, its brand is one of the most recognizable in the food delivery industry.
Question: How is DoorDash innovative?
Answer: DoorDash uses machine learning and artificial intelligence to optimize its delivery routes. Its continued investment in this technology will likely lead to further improvements in efficiency and cost savings. The company is also experimenting with new delivery methods, such as drones and robots.
The online food delivery industry is growing, and DoorDash is leading the pack. With a well-rounded business model and excellent execution, the company is poised for continued success. However, DoorDash faces some significant challenges that could impact its growth. These include intense competition, high customer acquisition costs, and regulatory risks. To overcome these challenges, DoorDash must continue to execute its strategy effectively and invest in crucial areas such as technology and marketing.
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