DoorDash Is Trouncing Its Rivals, and That’s Just the Start

(Bloomberg Opinion) -- The financial details for DoorDash Inc. — one of the biggest beneficiaries from the pandemic and one of the year’s most anticipated initial public offerings — are now out and they are stunning. Even more important for would-be investors, they signal that the food-delivery leader has a good chance of thriving in another larger industry: the last-mile delivery of anything.

Early Friday, DoorDash filed to go public with the U.S. Securities and Exchange Commission, revealing in its prospectus that revenue more than tripled in the first nine months of 2020 to $1.9 billion from $587 million year earlier. At the same time, its net loss shrank in the period to $149 million from $533 million last year, showing the company’s ability to improve profitability as it reaches bigger scale. The sales results also point to how DoorDash is rapidly extending its lead over its main competitors. To illustrate the disparity, Uber Eats and Grubhub increased sales by roughly 125% and 53%, respectively, in their latest reported quarters. Impressive for sure, but not DoorDash impressive.

DoorDash has thrived in the Covid-19 world. With many restaurants forced to either shut down physical locations or limit in-person dining, more business has moved to online orders, driving traffic to the food-delivery platforms. The growing opportunity has sparked a recent wave of consolidation. In June, Just Eat Takeaway.com NV agreed to buy Grubhub for $7.3 billion. And then a month later, Uber Technologies Inc. announced a deal to purchase Postmates for $2.65 billion. But even after these deals, DoorDash will remain the preeminent leader.

With its No. 1 position in food delivery, DoorDash says it will go after the larger prize of local commerce. The company plans to use its platform to eventually provide on-demand delivery for any product. “While food itself is a category that has a long runway for growth, we believe the network we have built ideally positions us to fulfill our vision of empowering all local businesses to compete in the convenience economy,” the company said. Notably, Uber is looking into this kind of expansion as well.

Read more: Uber Eats + Postmates Offers Amazon-Sized Opportunity: Tae Kim

Can DoorDash muscle into other categories outside of food? On the one hand, it is hard to see how it could ever be as efficient for a network of gig workers with sedans and other small vehicles to do last-mile delivery the way FedEx Corp. or United Parcel Service Inc. do. But some recent experiments show that the pandemic might have increased retailer appetite for having a non-traditional last-mile delivery partner. Sephora and Bed Bath & Beyond Inc. have recently collaborated with Instacart to offer same-day delivery from their stores. If those efforts are successful this holiday season, it could help DoorDash and its rivals make the case that they can play a bigger role in the on-demand economy.In any logistics-centric business, achieving density of deliveries is typically thought of as the holy grail because it is an essential component of reaching profitability. That would seem to make major metropolitan areas the most attractive place for a food-delivery company to focus its efforts. DoorDash, perhaps counterintuitively, has not taken that approach. It has emphasized blanketing suburban and smaller metropolitan areas, theorizing that these places are especially fertile ground because they are underserved when it comes to food-delivery options.

The filing also included other unexpected details about why the suburbs have been a good target for DoorDash: Parking and traffic are less nightmarish, making it easier to serve customers, and the high proportion of families makes for larger average orders. The company says it has 58% market share in the suburbs, a greater share than it has of the category overall. That focus should serve it well amid the pandemic and beyond. While consumers will certainly return to in-restaurant dining in greater numbers when the public health crisis abates, many who tried digital delivery for the first time this year will stick with it, even if they don’t do it as frequently.

It won’t be easy for any of the food-delivery insurgents to expand beyond their core businesses. But DoorDash’s booming growth and commanding market share show it is attempting the transition from solid footing.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.

Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

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