A Quick Guide to How DoorDash Works
Even though DoorDash is only used to deliver food, according to Founder and CEO Tony Xu DoorDash wants to achieve one goal, that is, to deliver things to people right in their hands and doing it in the most efficient manner possible. DoorDash works as an app that connects local stores with the users of the app.
The bridge between the local stores and the users of the app is being bridged by the “dashers.” DoorDash is a welcoming place that offers work to everyone. You just need to register with DoorDash and you will soon start receiving orders that you will have to pick up and deliver to the location mentioned in the order.
DoorDash prefers calling itself a logistics company. Their goal is to be able to serve three different kinds of audiences. First is the local stores or the local restaurants, the end customers who have ordered something through DoorDash and dashers who are basically middlemen who take the product from one point to the other.
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A Three-way model
DoorDash has been operating in almost across 600 cities in America. It is like a three-way solidarity between the customers, the local stores, and the delivery person. Restaurants can register themselves on DoorDash by submitting their menus. Dashers can register themselves by providing their vehicle details which must match the required criteria. The users just need to submit some basic information and start placing their orders.
Now the DoorDash app is available on all platforms like iOS, Android, web etc. In the beginning, it used to charge $1 for the first delivery and $4.99 for the deliveries that follow. The track feature on the app allows you to track your order. The best thing about DoorDash is that it’s not a one-way delivery process. It’s not just a delivery option for the users at home, but also the restaurants who have orders to deliver but not enough resources to make the deliveries.
DoorDash Does Two Types of Deliveries
Normal orders. These orders are the ones made by the users sitting at home or office who order using their phone or computer.
Drive orders. These orders are bigger than usual and would require bigger vehicles for delivery. These could be requested by restaurants or big parties who are expecting to do an order the size of a catering order.
2013 was the founding year of DoorDash and Khosla Ventures invested $2.4m in the model. The money-making part wasn’t really a struggle for DoorDash. The other major investors include CRV and Sequoia. The founding investor also includes Y-combinator. After that, DoorDash has raised over $600m over a few investment rounds.
You Wonder How DoorDash Makes Money?
One way DoorDash generates income is by the way of commission. DoorDash charges about 20% of the delivery fees paid by the user. The remaining amount goes to the dashers. In businesses like this one, there is a lot you cannot really predict. In the past, there has been no business model where a delivery person gets 80% of the fees.
They did suffer a loss of both revenue and resources. But after that, they realized the importance of involving both the other parties into the system. The drivers were paid a flat fee. Even for waiting for delivery orders, the drivers were being paid. There were two big ways DoorDash made their money.
They made changes to the delivery fees. The drivers weren’t getting paid upfront and without any delivery orders being placed. They still figured out ways of paying the drivers 80% and keeping the 20% to themselves, though the exact ratio was never revealed. Later, they received really big investments.
Another strategic move done was to partner with the restaurants. Restaurant owners paid a certain amount to be featured against their competitors. The exact figure is also not revealed, but the fee depended a lot on the type of food, order frequency, location etc.
A Summary of the Business Model
The success of the model relied completely on the delivery people. The 80% cut they were receiving was motivation enough for them and on top of that, they also get to keep any tips that they receive. For businesses, this worked as an easy marketing and a sales platform. They really didn’t have to do much. The businesses can choose to pay for promotions.
DoorDash has gained immense popularity in the way of bridging the gap between users and locals stores. Also, with the increasing popularity of deliveries, a lot of other businesses like Walmart are partnering up with DoorDash. But as for now, DoorDash has bridged the gap and made food ordering easy for the users along with helping the drivers while also providing a boost to the local businesses.
Is DoorDash right for you?
Readers, what do you think of DoorDash? Developing an app like DoorDash can boost your business as well. For that, you can Nimblechapps for on-demand delivery app development.