DoorDash's Strategy Made It the Most Successful Food Delivery Service in the US

When it comes to having food delivered to your doorstep in the US, you’re definitely not lacking in choices.

From GrubHub to Uber Eats, the food delivery industry is a somewhat crowded marketplace. So to make it big and beat out the competition, you have to be willing to make bold, calculated moves.

By March 2019, a new kid on the block by the name of DoorDash overtook seasoned competitors to earn the title of most consumer sales — boasting 27.6% of the on-demand delivery market.

From its impressive audience segmentation to its invaluable brand insights app Drive, DoorDash has been efficiently making its way to the top for the past few years. And with its impressive handling of the global pandemic in 2020, it’s clear that DoorDash’s success will only continue.

But, how did a student-founded delivery service from Palo Alto really become the largest on-demand food delivery brand in the US in under six years? And how is the brand performing in 2022?

Let’s dig in!

Humble Beginnings

Founded by Stanford University students in 2012, four friends — Zu, Tang, Fang, and Moore — were testing out a mobile app for small business owners when a local macaroon store owner asked for their help.

Using technology for delivery was still a relatively new venture in the early 2010s, and the founders saw an opportunity to enter the market with their website PaloAltoDelivery.com.

Source: DoorDash Blog

While they started small and local, with most customers being fellow Stanford students, by summer 2013 they received $120,000 in seed money from Y Combinator, and DoorDash was officially born.

From then on out, the founders stood by their mission to “build the local, on-demand Fedex”, further stating:

“We are a logistics company more so than a food company. We help small businesses grow, we give underemployed people meaningful work, and we offer affordable convenience to consumers. We’re tackling some of the most difficult logistical challenges that come with on-demand delivery — both in engineering and in operations.”

With a focus on logistics and technology, DoorDash has been able to maintain continual growth and revenue.

But who have they pushed to the side in their mad dash to the top? And how?

Strategically Overtaking the Competition

Though they were only five years old at the time, in 2018 DoorDash overtook food delivery giant Uber Eats — emerging as “the dark horse in the food delivery race.”

And by 2019, they beat out reigning champion GrubHub as well. So, what drives their growth and success? Let’s explore.

Source: Business of Apps

1. Audience Segmentation

Though there are many reasons DoorDash has been successful, one main driver has been the clear audience segmentation. Instead of lumping everyone into one category and treating them all the same, DoorDash separates its customers into two groups: Users and Restaurants.

There are many ways that businesses can separate out their audience — by location, age, gender, interests, education, etc. But separating one’s audience into defined groups makes advertising and marketing communication easier and more effective. When a brand manager knows which audience they’re addressing, they can tailor their communication style, visuals, and tone to be able to speak to that particular group most effectively.

For DoorDash, its first group, Users, are people who want convenience and high-quality food from the comfort of their homes — and are willing to pay for it.

Their second audience is made up of Restaurants — and DoorDash often targets those that don’t have the means to deliver or don’t have adequate seating for dining-in. Clearly, DoorDash understands who will be most in-need (and, therefore, most receptive) to their services, which has helped them grow strategically.

Finally, DoorDash also has its "Dashers" — individuals looking for steady yet flexible work. Though technically not customers of the service, they are separated from the other groups with their own app, making it easier to maintain a steady workforce.

Furthermore, by employing their own drivers to make deliveries and not outsourcing from a third party, DoorDash can control revenue and earn higher profits.

2. Advanced Value Propositions

As mentioned above in their mission statement, DoorDash is committed to tackling logistical problems and creating a simple, easy-to-use app that leaves their competition in the dust.

To accomplish this goal and set itself apart, DoorDash knows that providing additional value to its partners is key to creating a strong brand.

DoorDash has built its brand identity on offering more than just assistance with food deliveries. While many of their competitors can help restaurants reach a wider audience, none of them provide the same kind of invaluable, nuanced customer data as DoorDash.

Therefore, in an effort to enhance the experience for their Restaurants, DoorDash offers access to Drive, its unique customer insights app. From which products are most in-demand to data on surrounding neighborhoods and delivery times, Drive gives DoorDash a real leg up on the competition.

Because many local, smaller restaurants cannot afford to gather such extensive customer and brand insights on their own, partnering with DoorDash is an extremely appealing opportunity.

Furthermore, the Drive app offers Partner Restaurants access to their extensive “Dasher” fleet of drivers, customizable delivery options, and direct point-of-sale integration.

All of these features work together to help Partner Restaurants achieve better access to and understanding of their customer data. They also help define DoorDash’s brand positioning in terms of how they want current and potential Partner Restaurants to view them: as the brand that provides added value to the standard offering, making them the obvious choice for restaurants that want to get ahead.

3. Filling the Gap

To go up against established food delivery service providers and win, DoorDash had to have a bold and unique brand strategy.

Instead of trying to beat out its rivals on their home turf (large inner cities), DoorDash focused on areas with less competition — mainly the suburbs and smaller cities.

By differentiating themselves from the likes of Uber Eats and GrubHub and claiming their own space in the food delivery market, DoorDash was able to find a gap in their competitor’s marketing strategies and capitalize on it.

DoorDash found success and provided value in a largely ignored segment of the population by catering to new locations and target audiences. When considering your own brand strategy, it’s important to keep this example in mind.

Instead of advertising to the general public, research your competitors and find gaps in their brand marketing strategies. If, for example, they aren’t performing well with a niche audience you think your brand caters to, this is a great opportunity to grow your market share.

One of the best ways to identify such gaps is by using brand monitoring, which allows you to track the performance of your competitors and see where they’re faltering.

4. Technological Simplicity

It’s no secret that DoorDash is heavily invested in tackling logistical, engineering, and operational challenges via the use of cutting-edge technology.

From their brand insight app to their consumer-facing app, DoorDash understands that simplicity matters. There is a great deal that goes into the creation and improvement of their apps, and it would be all too easy to overwhelm users with fun, new feature releases or a complicated interface.

Ensuring that the end-user is met with a simple, intuitive experience is one of the main things that has set DoorDash apart from the competition. Their brand image is inextricably tied to this central concept of simplicity and ease-of-use, which leads to a better overall customer experience.

Should you choose to develop and implement an app for your brand, try to keep your overall brand image in mind — the level of simplicity or complexity should correspond with your brand’s identity and increase your brand’s continuity.

Getting Ahead in Covid-19

The past two years have been difficult, complicated, and devastating for people around the globe. Many businesses have suffered and struggled to remain competitive with all the necessary changes Covid-19 brought about.

To survive in this new world, brands like DoorDash had to get creative and consider how to best communicate with a scared and unsure community.

In March 2020, DoorDash CEO Tony Xu announced that they’d “stockpiled tens of thousands of gloves and bottles of hand sanitizer”, which they offered free of charge to their delivery drivers.

They also introduced contact-free deliveries as their default drop-off option, prioritizing the safety of their customers and drivers.

However, their most ingenious moves had to do with efforts made to support Dashers, Restaurant Partners, and the community as a whole.

Source: DoorDash Blog

Drivers with confirmed Covid-19 or a mandated quarantine were offered up to two weeks’ pay. Affected restaurant workers received invitations to DoorDash’s “priority access program” to become temporary Dashers while their work schedules were on hold.

Furthermore, on March 17, 2020, they offered 30 days with no commission fees for independent restaurants that joined their platform through the end of April — which was then extended to the end of May.

DoorDash also waived the commission fees for pick-up orders for all existing Partner Restaurants and reduced commission fees for local restaurants across the US by 50%.

Finally, DoorDash expanded Project DASH to assist government and nonprofit agencies, such as United Way Worldwide, by offering their last-mile solution to help get food and supplies to at-risk senior centers, schools, and food pantries.

While these well-timed moves might have backfired and DoorDash could have ended up losing money, the choice to make strategic decisions and take calculated risks to survive in an unknown time worked out for them.

By showing empathy and taking steps to support those at-risk, DoorDash connected with thousands of customers on a new level — which definitely shows in the numbers! With revenue of $2.9 billion and a valuation of $16 billion in 2020, DoorDash has continued its growth throughout the pandemic.

What Can You Learn from DoorDash in 2022?

Although their meteoric ascent would be hard to replicate, there are a few important takeaways that other mid-sized businesses can extract from DoorDash's strategy.

Source: Apple

1. Use technology to your advantage and invest in a simple user interface (UI).

Making it a priority to always push the technological envelope is one of the driving factors of DoorDash’s success — keep this in mind when trying to expand your own business.

Additionally, while it’s tempting to provide all the latest feature updates, a cluttered app can lead to frustrated customers and high churn rates. When in doubt, keep it simple.

2. Be flexible and willing to reevaluate your priorities when the state of the world demands it.

DoorDash made some bold but lucrative moves during the Covid-19 pandemic.

By focusing on supporting Partner Restaurants and their own employees instead of sacrificing them to the market in search of higher profits, DoorDash made good on their brand values.

Hopefully, there won’t be an event as life-changing and catastrophic as Covid-19 in the years to come. However, their handling of the pandemic is something that mid-sized companies can learn from going forward.

When a unique situation arises, be willing to reevaluate your brand and business priorities in favor of supporting your employees and community — customers usually respond well to brands that show empathy in times of need.

3. Remember the importance of customer data insights to support strategic brand growth.

From its own brand growth strategy to the customer insights app provided for Partner Restaurants, DoorDash clearly understands the importance of using customer data to gain key insights and make informed marketing decisions.

By tracking brand performance and gathering customer feedback, you’ll be better equipped to understand how customers are responding to your brand — what they like, dislike, or don’t care about.

Most importantly, the way a company responds to such insights is a good indicator of what kind of brand they are and how successful they’ll be in the long run.

Access to nuanced, detailed customer data — and the actionable steps subsequently taken — are key factors that differentiate good brands from great brands. Good brands test out theories and use gut feelings. Great brands listen to and base marketing decisions on detailed data.

Keep this in mind when the topic of brand tracking or customer insights come up in the future, as it’s a strong argument in favor of enhancing overall brand performance.

Final Thoughts

DoorDash has used technology, advanced value propositions, and a deep understanding of its market to become the US leader in online food delivery.

As of 2021, DoorDash boasted over 390,000 Partner Restaurants and 18 million users, with a market share of 45%. Their ascent to food delivery domination has been swift, though not without some bumps along the way. From accusations of withholding tips to a data breach in 2019, DoorDash’s history isn’t spotless.

However, it’s clear that DoorDash has learned from its past mistakes and used them to improve upon its service, offerings, and policies going forward — as well as solidify its brand image.

If this on-demand titan of the industry continues with its penchant for innovation and taking calculated risks, we’re interested to see how much more growing they have left to do.

2022 Updates: DoorDash Keeps On Growing

Source: Statista

According to recent data released by Statista, DoorDash has yet again beat the odds — reporting a 70% increase in gross order volume in 2021 and effectively defying all the "fears that the boost provided by restaurant closures and stay-at-home orders in 2020 could be short-lived".

Once again, this hard-working brand proved that its brand strategy and positioning have it the mark.

Over the last two years, DoorDash took everything in stride — using its cutting-edge technology to get ahead and placing customer insights front and center. The brand also made the smart move of expanding beyond just restaurant food delivery by adding grocery and alcohol delivery services, as well.

According to Felix Richter of Statista, the goal of this expansion is to "create more reasons to interact with its platform and subsequently increase order volume across all categories". Clearly, DoorDash plans to continue its growth trajectory.

For 2022, as seen in its recent shareholder letter, the brand states that the "addition of new verticals, new services, and new geographies provides more surfaces to execute against and greater room to drive long-term growth". Thus, Doordash expects to see order and volume between $48 and $50 billion — a solid increase from 2021's $42 billion.

The stakeholder letter goes on, stating:

"We continue to believe the transition to omni-channel local commerce is in its early innings and we are just beginning to build the platform we envision."

In July, DoorDash made the exciting announcement that it had officially acquired Helsinki-based food delivery brand Wolt — bringing its global coverage up to 27 countries.

On the brand's blog, DoorDash Co-Founder and CEO, Tony Xu, shared:

"Together with Wolt, we believe we have the best team and platform to serve merchants, consumers, and couriers in our existing and future markets. Our journey in building our international business is just beginning and we're confident in the incredible future we will build together."

However, in August, CNBC reported that DoorDash "beat Wall Street’s revenue expectations but showed a greater loss per share than anticipated."

DoorDash revealed that its revenue actually grew 30% year-over-year, "which the company attributed to increased order frequency and more monthly active users." It also saw an increase in the total number of orders it delivered, which "grew 23% year over year to 426 million." According to CNBC, Wolt accounted for 12 million of the total orders.

However, due to anticipating a "softer consumer spending environment", DoorDash warned "investors that consumer spending could deteriorate faster than anticipated, which could drive results below its expectations."

While DoorDash is well-positioned to continue its growth in 2022 and beyond, it can't control how willing and able consumers are to spend money on ordering food as inflation rises and cost of living increases. Needless to say, we'll be keeping close tabs on this situation.