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 mostuseful podcast in the world. I'm your host, Scott D clary. Thesuccess story podcast is part of the hub spot podcast network. The up spotpodcast network is the audio destination for business professionals who seek the best education andinspiration on how to grow a business. The spot podcast network hosts act ason 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 spotcompodcast network. Today I'm going to break down the story of door, theorigin story of the founders, how they raised money, how they grew,how they took their product to market, all the different iterations, the upsand the downs. This is going to be a case study that is goingto show you how do captured over fifty five percent of food delivery industry categorymarket share. They beat out grub hub, postmates, Uber eats. They arethe incumbent, they are the one to beat. I'm going to walkyou through how they did it. This...

...is a case study. This isdoor has business growth story. Uber eats, grub hub, postmates, door,these companies have been locked in a heated competition for years now they've beenvuying for dominant in the food delivery war. However, door overtook his comp competitorswith a fifty five percent market share in March of two thousand and twentyone, and they are accountable for fifty six percent of all food deliveries inthe USA. Door is evolved from a small student found it start up tothe 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 fora companies not only a decade old and it was student founded. These arenot senior tech founders. Let's talk about the students. So two thousand andtwelve Stanford Students, Tony Zoo, Stanley Kang, Andy Fang and Evan Moorebegan working on a small APP for small...

...rather, not a small APP forsmall but a large APP for small business owners. They weren't sure what theywanted 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 theirbusinesses 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 customerscould answer a short marketing attribution survey. But unfortunately, while some customers arewilling to answer the survey, it wasn't conduced to the business. It didn'tprovide enough value and it was relatively difficult to scale, expensive to install andmaintain whatnot. So they also got an idea for food delivery after interviewing amacarone store owner when they over heard her turning down a delivery order. Theywere interviewing her about the POS device, the point of sale device, butthey heard her turning down the delivery order. Then they realized that food delivery wasan 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 takingthe order, making some money shipping out to the customer. Only larger organizationslarger restaurants were well equipped to do this. So economies of scale right. Soafter asking around again, they found that very few restaurants deliver. Dueto inconsistent orders. Small businesses can't afford to have their own fleet of deliverydrivers 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 Altodeliverycom which only had a google voice number and men use in PDF format fora few local restaurants. They charge a flat rate of six dollars per deliverywith 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 couldhandle, so they began hiring people to help with deliveries, hung flyers.They also posted on craigslist. In two thousand and thirteen, after successfully pitchingdoors to investor that Y combinator, the company received a hundred and twenty thousanddollars in seat capital and officially renamed the company from Palo Alto delivery to doorDAS. It was in two thousand and...

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

...point four billion dollars. And afterthat 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 openkitchens where restaurants can just sell from a kitchen and they don't have tohave a brick and mortar storefront. Door also acquired caviare, a food deliveryAPP with listings from high end restaurants. It didn't deliver outside the APP andthen, of course, like with all good start up stories, there isa 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 restaurantshad to rely on services like door, Luberys, postmates and GRUB hub ifthey wanted to make any sales at all.

The massive surgeon orders allowed market leaderdoors take in a one point nine two billion dollars in revenue, butdespite that, they still weren't generating profits. Instead, the company was actually losingmoney, considering how expensive it was to ship and basically run those shippingand logistics for all the food. In Two thousand and twenty is when doorfinally went public with an IPO at a hundred and two dollars per share whenthey first went live on trading day, but ended the first day of beingpublic 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 ofskepticism when a company is this size but still not profitable. However, someanalysts believe that a do continues to grow even after the pandemic induced food deliverybusiness boom ends, it might become profitable in the future. However, itis not yet the door strategy. So what made door so successful? Wetouched on a few points, but ultimately...

...we have to figure out what madeit 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. TheAPP is simple, intuitive easy to use. This is what captures customersand this is what keeps customers. They made convenience to speed a priority andprovided sellers with a user friendly APP that lets them accept orders without ever speakingto a customer. They also focused on a technology first platform. They usetechnology is a driving force. So door has been able to stay ahead ofcompetitors by being technology driven and looking for ways to expand into new markets anddouble down on the tech that works. So, for example, one innovativepart of their business model was that customers could order food from any restaurant intheir service area, which helped boost their market share immensely during the covid nineteenpandemic. And this also played into the emotional component of ordering from local supportinglocal 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, itprovided merchants with invaluable data like brand and consumer insights. This kind of datais beneficial to smaller shops. They may not have resources to gather it independentlyand it's early days. Door would also give discount codes or coup on seeusers who review it on the APP store. This feedback led to improvements in theAPP and, lastly, it's sort of always been focused on the future. The company, although is primarily a food delivery service, the company isalways looking to branch out, try new things, to test iterate. They'renever 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 wordson door. Even at its best, the economy that all these on demanddelivery 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 willhave to constantly be reinventing, be iterating,...

...be trying new things. That's whatdoor did well through its entire life cycle. After they continue to dotoday, 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 casestudy. 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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