How DoorDash Dominated Food Delivery By Making A Contrarian Bet
DoorDash is pretty much the big dog in the food delivery market, with ~60% of the market share. But when it started in 2013, it was just a small project entering a crowded market dominated by the likes of Grubhub.
So, how did they manage to penetrate the market?
Here are 3 lessons that you can learn from their success 👇
Survey Your Potential Customers:
The founders of Doordash were on a mission to solve a problem for small businesses so they went to business owners and asked them: “If there is a magic wand and we can take away any problem for you this week, what would it be?”.
Many mentioned the difficulty of providing delivery to customers.
Delivery services at the time were focusing on larger cities and not serving smaller ones. This forced disadvantaged business owners to grapple with the choice of hiring a delivery driver and paying them even during lulls in orders, or foregoing delivery altogether.
The team came out of their initial research with several questions:
Why is delivery not a thing outside NY?
Do people want delivery and how much are they willing to pay for it?
Are restaurants interested in working with a delivery service?
Which takes us to the second lesson…
The Pilot Program:
To answer the questions, the cofounders quickly put together a simple website with 8 pdf menus for customers to place orders via phone. Instead of developing a full app, they focused on gathering customer feedback and validating their idea.
For the next 5 months, the team spread the word around the Stanford University campus through flyers and personally delivered the orders every day from 12-1:30 pm and 5:30- 8 pm.
Even though the order volume wasn’t high at first(~10/day), it was enough to get useful insights and have productive conversations with restaurants.
Identify Underserved Customers:
As I mentioned, most delivery companies at the time focused on larger metropoli. Doordash took a contrarian approach and doubled down on the suburbs instead.
Suburban customers tend to place larger orders which increases the company's revenue.
It's much easier to deliver to addresses in suburban areas which usually have driveways and are mostly single-family homes reducing the margin for error.
While some restaurants in larger cities offer delivery services inhouse, those in suburbs are less likely to do so.
As Doordash’s pilot program progressed, the team automated the ordering process, hired drivers, and streamlined operations. The program’s success helped them get accepted to Y Combinator and as they say, the rest is history.
I’ll leave you with their application video to Y Combinator.