DoorDash: Looking for Profitable Routes - [Business Breakdowns, EP. 88]

23 snips

Dec 14, 2022

Matt Newberg from HNGRY dives into the fascinating world of DoorDash, the food delivery giant founded by Stanford students. He discusses DoorDash's innovative three-sided marketplace and its rapid growth in local delivery. The conversation covers last-mile logistics, including economic challenges and strategies for improving profitability. Newberg also explores legislative impacts on gig workers, innovative solutions like ghost kitchens, and DoorDash’s evolving advertising strategies in the competitive landscape. Tune in for an insightful breakdown!

Ask episode

AI Snips

Chapters

Transcript

Episode notes

ANECDOTE

DoorDash Origin Story

DoorDash's founders interviewed 100+ businesses, discovering a macaroon shop owner's delivery struggles.
This led to a crude website, PaloAltoDelivery.com, and their first order: pad thai and egg rolls for a marijuana scholar.

INSIGHT

Order Size and Profitability

DoorDash's profitability varies significantly with order size; a $100 order is highly profitable, unlike the average $31 order.
The actual per-order profit margin, often around 3%, excludes overhead costs, which can increase with scale.

ADVICE

Reclaiming Customers

Restaurants should leverage their own channels to convert marketplace customers to direct customers, reducing commission fees.
Offer incentives like coupons or free delivery for ordering directly through the restaurant's website or app.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

This is Zack Fuss, an investor at Irenic Capital. Today, I’m joined by Matt Newberg of HNGRY to help us break down DoorDash, the popular food delivery service. DoorDash was founded in 2013 by 4 Stanford students who saw an opportunity to make it easier for people to get the food they love delivered to them. Today, DoorDash’s three-sided marketplace serves as one of the largest local delivery companies in the world. It serves millions of customers and partners with hundreds of thousands of restaurants across 27 countries, run-rating at over $50 bn of gross merchandise value. We will discuss how DoorDash is working to build the infrastructure for local commerce; expanding its offering beyond restaurants, introducing a vertically owned convenience channel, ghost kitchens, and advertising to build a durable competitive advantage and work towards a sustainably profitable business model. We hope you enjoy this breakdown of DoorDash.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

-----

Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.

Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.

Show Notes

[00:02:52] - [First question] - The size and scale of DoorDash and the industry today

[00:04:35] - Early growth and business history

[00:08:33] - Unit economics of a DoorDash order

[00:11:37] - Creative ways DoorDash is maintaining margins and driving growth

[00:13:33] - Optimizing delivery operations to minimize overhead

[00:16:45] - White-labeling versus first-party logistics

[00:20:03] - How restaurants maintain their own margins and customers while using DoorDash

[00:23:04] - Overview of their recruitment and labor model for delivery drivers

[00:24:36] - Implications of new legislation treating delivery drivers as employees

[00:27:51] - Positive and negative impacts of DashMart, ghost kitchens, and automation

[00:30:53] - The importance of ghost kitchens and how they work

[00:36:23] - Automation and its role at DoorDash

[00:39:15] - Virtual brands in the restaurant industry

[00:43:18] - Advertising sales models on DoorDash and similar apps

[00:45:20] - What ads look like on these apps

[00:46:22] - How grocery store profits from slotting fees translate to delivery

[00:47:33] - Main takeaways from studying DoorDash as a business