Today, in the 21st century, we all live a hustle-bustle life where online food ordering has become an integral part of our lifestyle. Can you imagine an online food delivery business dream started in the hostel dorms of four students in Stafford back in 2013 could change into a Billion-dollar giant?

DoorDash, an online food delivery company started by four students Tony Xu, Stanley Tang, Andy Fang, and Evan Moore now dominates the online food delivery market in the United States by a market share of 66 percent.

Hungry to know more? Let’s dig into the story behind this extraordinary journey behind this revolutionizing idea that has reshaped the culinary landscape.

DoorDash business model – How it works & Makes Money?

What is DoorDash?

DoorDash is one of the most successful online food delivery services where people choose their favourite food from the restaurant in their locality and get it delivered to their location. It connects the consumers and the local restaurants by independent delivery persons referred to as Dashers.

DoorDash Business model

Back in 2013, when most online food delivery companies focused on the cities, DoorDash smartly targeted the local towns and expanded its partnership with the restaurants in that locality. This business model is referred to as the Blue Ocean strategy.

DoorDash has adopted a four-step platform-to-consumer model that includes:

Placing an order: The user chooses his favourite food from the nearby restaurant in partnership with DoorDash.
Payment: The user completes the transaction via in-app payment options. Upon receiving the payment, the orders are directed to the respective restaurant.
Tracking of orders: The dashers deliver the food to the customer. Both the customers and restaurants can track the order.
Food delivery: The dashers drop the food at the respective customer’s address in the minimal time possible.

Key players in DoorDash performance

DoorDash follows a Y-structured business model that combines the consumer, restaurant, and delivery person. Another reason for DoorDash’s success is audience segmentation. It classifies its customers into two groups: Restaurants and Users.

Firstly, users are the people who require high-quality food to be delivered to their homes. And secondly, the restaurants which lack facilities for delivery and accommodation.

The Dashers do not come under any of the above groups. They have a separate app, which makes it easier to maintain their workflow.

DoorDash Revenue

DoorDash revenue in 2023 was $8.15 B after a decade since its beginning.
This amount is 24.38% greater than the last year’s record.
They made a revenue of $6.58 B in 2022 and $4.88 B in 2021. It shows the consistent growth of the company throughout the years.

DoorDash has 32 million active customers across 25 countries, where the US, Canada, Australia, and New Zealand comparatively have a larger user base. This huge customer base enhances the revenue generated by the company.

How does DoorDash make this much money?

Revenue streams of DoorDash

Commission fee on each order: DoorDash charges up to 30% of the total sum as commission for every order made through its platform. In this way, the company earns money from the partnership restaurants.

Delivery fee on each delivery: They also charge a delivery fee for each order, which changes based on the distance that the dashers have to travel, the restaurant, and the customer’s location – whether it is a high-traffic-prone area. According to these parameters, the delivery fee may range from $1.99 to $ 5.99.

Charges for Advertisements: Like every other app, DoorDash also collects large amounts of money via advertisements. It charges for each pop-up banner and for being at the top of the list of restaurants.

DashPass membership: DashPass is a subscription service similar to a membership card where the customer has to pay an amount, and enjoys benefits like free delivery of orders over $12. One can get your DashPass membership by paying an amount of $9.99/month. In this way, the company convinces customers to buy a membership card by giving special offers.

DashMart-online grocery store: DashMart is an online grocery service provider similar to InstaCart, Zepto, etc. It is an inbuilt store in the DoorDash app. DoorDash charges a commission fee from the retailers who wish to sell their products over DashMart. The profit made out of DashMart increases the revenue of the company.

Dynamic pricing: It is a pricing scheme where the company has total control over the price of the food ordered and the delivery fee. Usually, it is applied to those products in demand.

COVID-19: DoorDash’s wingman of growth

When the world was affected by the economic crisis during the pandemic, DoorDash had its golden era. The company’s revenue hugely increased due to the lockdown situation.

When most people couldn’t go out to buy food products, DoorDash got their back by making food delivery and grocery delivery (via Dashmart).

People shut themselves inside the doors of the house, and the no. of customers visiting the restaurants dropped rapidly, affecting the working class of the restaurants. DoorDash helped the restaurants to earn money by delivering food online. The company’s revenue rapidly increased to $4.88 billion in two years and was about $6.58 billion by the end of 2022.

DoorDash provided free gloves and sanitizers for dashers to ensure their safety and introduced contact-free delivery as the default option for all orders. They also reduced the commission fee for the restaurants during the pandemic.

Project Dash is a program started during the pandemic to help government and non-profit agencies deliver food and other essential supplies to the people.

DoorDash’s participation during the pandemic gained them trust among the people, which drastically increased their user count. In 2020, the company made a revenue of $2.9 billion.

Related: Zepto Business Model

Conclusion

Even though it started small, DoorDash had immense growth in a competitive environment very soon. The success of this company is mainly due to the felicitous use of technology in all aspects of the business. Logistical and operational problems were effectively addressed using the technology. It triumphed over competitors such as Uber Eats, Grubhub, and Postmates and made its own inspirational story for the world to applaud.

Want to go big like DoorDash?

Start your business by developing a user-friendly interface and a high-performing app. Don’t know where to start? Look no further. Smarther is one of the leading app development companies in Chennai. We have developed more than 250 apps and more than 500 websites.