DoorDash – Business Model and Revenue Sources Revealed
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DoorDash – Business Model and Revenue Sources Revealed

Dileep Gupta
By Dileep Gupta| Monday, October 15, 2018 16:02 PM |6 min read
DoorDash - Business Model and Revenue Sources Revealed

DoorDash is an online food delivery service that works on bridging the gap between the customers and the merchants. Initially it was started with the intention of delivering logistics to the customers but for now they are only focusing on food delivery.

Business model of this on demand food delivery service is such that it benefits the customers, the merchants and the delivery guys all at the same time. This is because every transaction involves all the three segments. In this article, we will get answers to most FAQs such as “How does DoorDash make money?”, “How much does DoorDash charge?”, etc.

So, without further ado, let’s begin!

Facts and Funds of  On Demand Food Delivery Service

Founders: Tony Xu, Andy Fang, Stanley Tang, Evan Charles Moore

CEO: Tony Xu

Year of foundation: June 2013

DoorDash net worth: $717M

Headquarters: San Francisco, California, United States

Number of employees: 850

Type of business: Privately held company

What makes DoorDash stand out?

Any business stands out because of the extraordinary things they provide to the customers. The products and services that they offer should be of the best quality and should fulfill the needs of the customers. DoorDash has some unique features that has made its business model stand out:

  • Benefits each segment all at the same time.
  • DoorDash has their own drivers whom they address as “Dashers”.
  • The DoorDash delivery fee is between $5 to $8 for the users.
  • DoorDash revenue comes from 20% commission fee charged from the merchants.
  • The Dashers make more than $600 in one year.
  • DoorDash operates in 20 places in USA and Canada.

Many online food services like Zomato, Swiggy, Foodpanda, etc. have started serving in India after seeing business models like DoorDash succeed. The food service apps of these Indian companies not only lets customers order food but also find the perfect restaurant for the right occasion. If you are wondering how to build restaurant finder mobile apps just like Zomato. Check linked article.

Funding timeline of DoorDash

Business model canvas: How does DoorDash work

Like any other startup, DoorDash has seen hurdles during the early days. And the biggest hurdle for a startup is funds. Despite all the difficulties that this on demand food delivery service had to face, they have generated a healthy amount of funds for the business. Today DoorDash net worth has been estimated to be $4 billion.

Value Propositions

The DoorDash business model is of Y structure. It focuses on all three segments and keeps them well connected for the smooth running of business. This is done by connecting the drivers with restaurants and customers so that tracking the delivery time becomes easy.

How DoorDash works for its segments:

For users:

  • Massive number of restaurants to choose from all over the city.
  • Service available 24 hours a day, 7 days a week.
  • A feature to track the delivery orders on the way.
  • Simple cost effective solution to hunger.

For restaurants:

  • An extended customer base.
  • Provides their own delivery guy to deliver.
  • An easy and cheap of reaching customers across the city.
  • Branding and marketing for restaurants.

For Dashers:

  • A great source of income.
  • Dashers can earn up to $600 in a year.
  • Chances of tips from customers depending on service quality.

DoorDash Customer Segments

This on demand food delivery service targets the same customers that most of the eateries in the city do. But then how does DoorDash make money? The aim of the business is to fill the gaps that other eateries or service providers are creating.

The customer segments that DoorDash serves are:

Users:

  • People cannot cook due to lack of time.
  • Professionals who can’t go out during lunch because time is the constraint.
  • Students who don’t have a kitchen facility.
  • People who don’t know how to cook.

Restaurants:

  • Food joints that have no delivery service.
  • Restaurants with poor seating arrangements.
  • New restaurants that need huge customer base.
  • Eateries looking for advertising and marketing.

Drivers:

  • People looking for part time or full-time work.
  • People looking for good income via salary and tips.

Customer Relationship

You must be wondering how an on demand food delivery service works on its strong customer relationship. To build a strong relationship with the customers, Doordash has taken amazing steps. They have used social media to a great extent to connect with their customers directly. Socials like Twitter, Instagram and Facebook are the most active place for the business. This way they are reaching a huge audience and also staying in touch with the regular ones.

Having a good customer relationship has helped the business grow and retain the existing audience. DoorDash also provides good online support to its users such as feedback, complains, ratings and suggestions. These things help improve the business by taking hints of what customers need.

Another way DoorDash is doing things right is by reaching customers via email to inform them about discounts, offers or any development in the business. This approach gives a personal touch to the process and keeps the customers reminded of the business. Customers are also given the facility of contacting someone from the company just in case they need to.

[Also read: Grubhub Business Model and Revenue Sources: {Full Explanation}]

How does DoorDash work?

Now that we have learned what is DoorDash, let’s take a look at how does Doordash work as a business. The following four steps is all you need to know to learn how to use DoorDash if you are a user, driver or a merchant:

Step 1: Choose what to order

The users can browse through a wide range of options for their choice of food. The search can be filtered as per the need of the customer and selections can be made. They are also given the facility to favourite frequently selected restaurants to make it easy to order the next time.

Step 2: Making payment

The payment is made when the order is placed. In this process the restaurant and the delivery location has to be mentioned. The distance between the pickup and drop off points has always decided how much does DoorDash charge for delivery. Once the payment is made, the order is sent to the respective restaurants and the food is prepared.

Step 3: Track the order

The Dasher picks up the packaged food from the food joint and sets out for delivery. For the convenience of customers, the DoorDash mobile app has the feature to track the order. This feature was specially built in the application for user convenience.

Step 4: Delivery

The Dashers reach the drop off points and deliver the food. The DoorDash delivery fee has already been paid during the payment process but the users can tip the Dashers if they wish to. However, this completely depends on the customer.

Business Model Canvas: How does DoorDash work?

Business model canvas: How does DoorDash work

DoorDash revenue model

The revenue generation model for any business be it a startup or a well-established business should be quite strategic. This is where the cost of the business is paid by and the profit is generated. The DoorDash cost includes maintenance costs, sales cost, Dasher’s salary and retention of its personnel, and not the forget the cost of investing in an on-demand app development company.

[Extra: Restaurant App Development: Benefits Of Online Food Ordering Services]

DoorDash earns from the following sources:

Commission

DoorDash serves the customers by delivering the food from restaurants to the customers. They have become a huge platform and when a restaurant is chosen by any DoorDash user, it earns 20% commission from the restaurants on each order.

Advertisement

Any restaurant that wishes to advertise themselves on the DoorDash app has to pay in order to be ranked in one of the top places. This is done to increase the visibility of the restaurants and earn more customers. For this placement, DoorDash charges.

Delivery fee

The delivery fee is another source of income for DoorDash. The amount is decided during the payment process depending on the distance from the pickup to the delivery point. Usually, the delivery fee ranges from $5 to $8.

Channels

DoorDash operates through an online website www.doordash.com and most of its networking is done via website. This website also can be used to order food and track delivery packages.

With the increase in demand for mobile applications, DoorDash decided to have a mobile application for iOS first and used an iPhone app development company for the same. Later, as the business grew they also got one for Android users. The application has all the necessary features from ‘Search nearby restaurants’ to ‘How to use DoorDash app’ guide. DoorDash has a Person to Person type of on demand delivery app development where one demands services from another person using the same app.

[Want to build an app like DoorDash? See How to Build a Successful On-Demand Delivery App?]

The future of DoorDash

Currently, DoorDash is working to expand and add as many restaurants as possible. This will bring in more customers to the business and more opportunities for Dashers to work. The sooner the business expands, the quicker it’s going to see success.

DoorDash is also trying to constantly improve their mobile application for user convenience and more opportunities. They are working on an app that has great performance and can store huge restaurant information without slowing down.

They have also come up with a rating feature that the customers will use to rate the entire order based on the delivery service quality and food quality. These ratings will be known as ‘Delights’ and each new customer can use this as a reference when ordering from that particular restaurant.

 

Related Articles:

Continue exploring the landscape of product design with these helpful resources: delivery on demand app builderDoorDash Business ModelDoorDash Revenue Sources
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Dileep Gupta
About The Author

Dileep Gupta, the Chief Delivery Office at Appinventiv is someone who having worked with hundreds of clients worldwide, knows what they need in terms of product and service delivery. Having acknowledged himself with both the human and technical side of an app, Dileep is someone who gets things done to make an app reach its people and then the world, on time and above par met expectations.

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