How Door Dash Captured 55% Food Delivery Market Share and Won Their Category

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Growth Story is a weekly podcast that breaks down the strategy and tactics utilized by high growth companies, in a short case study format hosted by Scott D. Clary (@scottdclary)

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Welcome to success story, the most useful podcast in the world. I'm your host, Scott D clary. The success story podcast is part of the hub spot podcast network. The up spot podcast network is the audio destination for business professionals who seek the best education and inspiration on how to grow a business. The spot podcast network hosts act as on demand mentors. Entrepreneurs startups and scale ups through practical tips and inspirational stories. Listen, learn and grow with the up spot podcast network at House spotcom podcast network. Today I'm going to break down the story of door, the origin story of the founders, how they raised money, how they grew, how they took their product to market, all the different iterations, the ups and the downs. This is going to be a case study that is going to show you how do captured over fifty five percent of food delivery industry category market share. They beat out grub hub, postmates, Uber eats. They are the incumbent, they are the one to beat. I'm going to walk you through how they did it. This...

...is a case study. This is door has business growth story. Uber eats, grub hub, postmates, door, these companies have been locked in a heated competition for years now they've been vuying for dominant in the food delivery war. However, door overtook his comp competitors with a fifty five percent market share in March of two thousand and twenty one, and they are accountable for fifty six percent of all food deliveries in the USA. Door is evolved from a small student found it start up to the most successful online food delivery platform in America. In just seven years, it even broken into Australia, Canada and Japanese markets. It's pretty impressive for a companies not only a decade old and it was student founded. These are not senior tech founders. Let's talk about the students. So two thousand and twelve Stanford Students, Tony Zoo, Stanley Kang, Andy Fang and Evan Moore began working on a small APP for small...

...rather, not a small APP for small but a large APP for small business owners. They weren't sure what they wanted to build, only that they wanted it to be used by small businesses. So they interviewed hundreds of business owners in the area, asking what their businesses were like and if there was anything in particular that they needed help with. They tried setting up ipads at the retail point of sale so the customers could answer a short marketing attribution survey. But unfortunately, while some customers are willing to answer the survey, it wasn't conduced to the business. It didn't provide enough value and it was relatively difficult to scale, expensive to install and maintain whatnot. So they also got an idea for food delivery after interviewing a macarone store owner when they over heard her turning down a delivery order. They were interviewing her about the POS device, the point of sale device, but they heard her turning down the delivery order. Then they realized that food delivery was an issue for restaurants. There was no scalable solution to deliver food. So it got to the point where restaurant...

...owners actually turned down orders versus taking the order, making some money shipping out to the customer. Only larger organizations larger restaurants were well equipped to do this. So economies of scale right. So after asking around again, they found that very few restaurants deliver. Due to inconsistent orders. Small businesses can't afford to have their own fleet of delivery drivers when they might receive some delivery orders one day, virtually none the next, and so on and so forth. So The for students founded Palo Alto deliverycom which only had a google voice number and men use in PDF format for a few local restaurants. They charge a flat rate of six dollars per delivery with no minimum mort size, and the four of them personally handled the deliveries. Once the business took off, they started receiving more orders than they could handle, so they began hiring people to help with deliveries, hung flyers. They also posted on craigslist. In two thousand and thirteen, after successfully pitching doors to investor that Y combinator, the company received a hundred and twenty thousand dollars in seat capital and officially renamed the company from Palo Alto delivery to door DAS. It was in two thousand and...

...thirteen that really really kicked off their incredible growth. In two thousand and fifteen, after spending two two years and why combinator, door was operating in eighteen different cities and received sixty million dollars in investment. With the startups first launch of Canada. In Two thousand and sixteen, coltsadventures and Kleiner Perkins invested another a hundred and twenty seven million dollars into the company. Surprisingly, though, doors valuation went down to seven hundred million despite the increase of investments. It was a very competitive market. However, they found a way to outgrow the competitive market, which was to buy competitors. First acquisition. In two thousand and seventeen, do acquired rickshaw, a start up the focused on delivery and logistics. At the time, door was working on its own platform, door drive. By acquiring rickshaw, door could integrate some aspects of rickshaw software with do drive. This acquisition strategy brought them to the next level. It was in two thousand and eighteen, after they had acquired several companies like rickshaw, that's soft bank invested five hundred and thirty five million dollars into door. The food delivery service reached Unicorn status with this investment, with a valuation of one...

...point four billion dollars. And after that they just continue to grow. By the end of two thousand and eighteen, doors managed overtake uberrets as the second most popular food delivery service in America. Expansion continued. In by two thousand and nineteen, the company open it. Door kitchen a ghost kitchen in California. The ghost kitchen concept is the open kitchens where restaurants can just sell from a kitchen and they don't have to have a brick and mortar storefront. Door also acquired caviare, a food delivery APP with listings from high end restaurants. It didn't deliver outside the APP and then, of course, like with all good start up stories, there is a little bit of luck. So the delivery boom when covid nineteen hits. In Two thousand and twenty, the on demand food delivery industry blew up. So shelter and place orders created huge reduction in foot traffic, meaning that restaurants had to rely on services like door, Luberys, postmates and GRUB hub if they wanted to make any sales at all.

The massive surgeon orders allowed market leader doors take in a one point nine two billion dollars in revenue, but despite that, they still weren't generating profits. Instead, the company was actually losing money, considering how expensive it was to ship and basically run those shipping and logistics for all the food. In Two thousand and twenty is when door finally went public with an IPO at a hundred and two dollars per share when they first went live on trading day, but ended the first day of being public with a share price of a hundred eighty nine dollars and fifty one sense, despite its lack of profitability, investors seem to be interested indoor. However, not every major institutional investor was on board. There was a lot of skepticism when a company is this size but still not profitable. However, some analysts believe that a do continues to grow even after the pandemic induced food delivery business boom ends, it might become profitable in the future. However, it is not yet the door strategy. So what made door so successful? We touched on a few points, but ultimately...

...we have to figure out what made it stand out from its competitors. Because, again, it's a crowded market. So they have the investment in door definitely played a part in its success, but other companies had money too. It's not just because of the money. So number one was simplicity. First, door really kept things basic. The APP is simple, intuitive easy to use. This is what captures customers and this is what keeps customers. They made convenience to speed a priority and provided sellers with a user friendly APP that lets them accept orders without ever speaking to a customer. They also focused on a technology first platform. They use technology is a driving force. So door has been able to stay ahead of competitors by being technology driven and looking for ways to expand into new markets and double down on the tech that works. So, for example, one innovative part of their business model was that customers could order food from any restaurant in their service area, which helped boost their market share immensely during the covid nineteen pandemic. And this also played into the emotional component of ordering from local supporting local restaurants throughout Covid so the company partner...

...with both large and small businesses, not just from the inner city but also from the suburbs. Additionally, it provided merchants with invaluable data like brand and consumer insights. This kind of data is beneficial to smaller shops. They may not have resources to gather it independently and it's early days. Door would also give discount codes or coup on see users who review it on the APP store. This feedback led to improvements in the APP and, lastly, it's sort of always been focused on the future. The company, although is primarily a food delivery service, the company is always looking to branch out, try new things, to test iterate. They're never complacent. So the goal is to provide and on demand delivery service, not just for food but for virtually anything that needs delivery. So final words on door. Even at its best, the economy that all these on demand delivery industry and services are based on can still be a little bit unstable. But the point is to maintain a position as a market leader, you will have to constantly be reinventing, be iterating,...

...be trying new things. That's what door did well through its entire life cycle. After they continue to do today, and that is likely why they will continue to grow in the future. All right, that's it for today, so I hope you enjoyed another case study. If you haven't already hit that like button, hit subscribe, leave a comment below and I'll see you again next time.

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