DoorDash Business Model: A Case Study

Just imagine you are a college student in a small town, engrossed in your studies. Suddenly, your stomach growls, reminding you that you haven't eaten anything since morning. There are not many options around, and you cannot afford to spend time cooking or going out. This is when you discover DoorDash - a platform that brings your favorite meal from the restaurant of your choice straight to your door.

What is DoorDash?

DoorDash is an on-demand food delivery service founded in 2013. Its business model effectively fills the gap between consumers wanting easy access to restaurant meals and restaurants wanting to increase their reach and sales.

How Does DoorDash Work?

DoorDash uses a B2C model catering to three different customer segments – end-users (people who order food), restaurants, and dashers (the delivery personnel).

1. End Users: They download the DoorDash app, select a restaurant, choose the food items, pay for the food, and wait for delivery. They can also track the order in real-time.
2. Restaurants: They list their business on the DoorDash platform, prepare the food once the order is placed, and hand it over to the dashers.
3. Dashers: They accept the delivery tasks from the DoorDash app, pick up the order from the restaurant, and deliver it to the end-user within the promised time.

How Does DoorDash Make Money?

DoorDash earns its revenue mainly from the following sources:

1. Delivery Fees: Charged from the customers, typically ranging from $1.99 to $8.
2. Commission: A 20-25% commission from restaurants on each order.
3. Advertising: Restaurants pay a fee to get featured on the platform, leading to a higher visibility and consequently higher sales.
4. DashPass: A subscription model where customers pay a monthly fee ($9.99) and get benefits like zero delivery fees on orders above $15.

Why?

DoorDash's success lies in its ability to address the consumer's pain point of access and delivery of quality food from a range of restaurants, especially in markets where delivery options were limited. It adopted a strategy of not just focusing on established markets like big cities but also small towns and cities.

Conclusion

The DoorDash model is an excellent example of a platform business that bridges the gap between consumers' demand and suppliers (restaurants). Through a well-integrated technological interface, transparency in order processing, and a balanced focus on all three customer segments, it has now grown to be one of the biggest on-demand delivery services in the US.