When DoorDash first launched its food delivery service in 2013, it was already facing competition from established companies like Grubhub, Seamless, and Postmates. After years of strategy, however, DoorDash gained market share, revenue, and the top slot in what became known as the food delivery wars.
So how did DoorDash become the biggest food delivery company in the US? The company’s initial team, including founders Tony Xu, Stanley Tang, Andy Fang, and Evan Moore, focused on differentiation, filling gaps in service that their competitors had left out.
One of those first 50 employees, Michael Bloch, joined in 2015 as a strategy and operations manager in the Bay Area before being promoted to general manager of DoorDash’s New York operations. In a recent Twitter thread, Bloch outlined four key strategies the team used to get DoorDash to a $32 billion valuation and $182 share price upon debuting on the New York Stock Exchange.
1. Focus on the suburbs
According to Bloch, delivering in cities poses a unique set of challenges: aside from traffic and parking issues, customers expect low prices, and drivers expect higher wages. When DoorDash attempted to gain customers in New York, the company ran into a saturated marketplace. After three years, the company hadn’t gained much traction.
“The market was stagnant & unprofitable. Seamless had a 17 year head start and $0 delivery fees,” Bloch tweeted. “Uber had 50x our marketing budget. We knew it wouldn't be a fair fight, so we tactically retreated.”
Instead of trying to beat Uber Eats or Seamless at their own game, DoorDash decided to shift focus to the tri-state area suburbs: Long Island, New Jersey, Westchester, and Connecticut. The pivot was a success, and DoorDash’s New York operations finally became profitable. With those gains, the team reinvested back into the city. In 2020, DoorDash still isn’t leading in New York City (Uber Eats is still top dog), but the company has a 25% market share, gaining on GrubHub and Postmates, both of whom lost market share in the city since 2018, according to the Wall Street Journal.
“We found instant product market fit. Business skyrocketed and we were profitable in months,” he wrote. “Over time, we reinvested those gains into the city and fought on our terms.”
2. Selection and quality over price and speed
Bloch’s next strategy involved focusing on the aspects of food delivery that Uber Eats and Seamless were ignoring. According to him, “In food delivery, you can compete on four things – price, speed, selection, and quality.” While Uber focused on speed, and Seamless focused on price, it seemed there was a space for DoorDaash to focus on selection and quality. Besides, customers didn’t seem to care too much about a quick delivery, anyway.
“Our analysis showed there was limited marginal benefit to customer conversion or retention rates under 42 minute ETAs,” Bloch wrote. “As long as deliveries were sub 42min, customers didn't really care how long they took. Uber focused on achieving sub 30min delivery times to their own detriment.”
In terms of selection, DoorDash focused on partnering with restaurants customers wanted, including large chains like McDonald’s, Starbucks, and Subway. Customers evidently appreciated DoorDash’s focus on quality as well, which ensured orders were delivered without any mistakes or mishaps.
3. Obsess over the merchant, “dasher,” and customer
While its competitors prioritized customers above delivery drivers and restaurants, Bloch says that DoorDash focused on all three to maintain relationships, and therefore sought to be a well-oiled machine.
“By treating merchants & dashers the right way, they became allies, not adversaries,” he wrote. “Restaurants in particular felt they could trust DoorDash more vs. the competition. From the host at the front desk, to the store GM, to the business owner, they all chose to send business our way.”
DoorDash’s business model asks fundamental questions about delivery drivers, or “dashers”: can they make a livable income? Like most gig workers, the more they deliver, the more money they’ll make per hour. However, according to a study by #PayUp, delivery drivers make just $1.45 per hour on average, factoring in expenses like gas and taxes.
4. The team is everything
Like any good company, DoorDash prides itself on its employees. During Bloch’s three-year stint with the company, he grew the team from 50 to 2,500.
“Overall, running a 3 sided marketplace is really, REALLY hard,” Bloch added. “There is no resting on your laurels. It requires 24/7 focus and world-class execution across every part of the business.”
