If there’s one segment of eCommerce that’s seen an exorbitant surge in traffic as a result of the coronavirus pandemic, it’s platform-to-consumer delivery. More specifically, food and restaurant platform-to-consumer delivery. With a reported market share of some $26.5 Billion in the US during 2020 (a 204 percent increase since 2015), food delivery platform apps have permanently changed the face of the retail food and beverage industry—despite indications of backlash from independent restaurateurs and customers alike.
Online grocery delivery reported a 3 percent increase in daily sales in August 2020, with some indicators that it amounted to over 7 percent of all retail grocery sales at the end of the year. In comparison, online food service delivery saw an increase of over 200 percent in new monthly users during the peak of the coronavirus in March 2020. But grocery delivery services aren’t exactly a new phenomenon. Peapod, which launched over 30 years ago, may have been one of the first pioneers in grocery delivery. But its share of the online market faded quickly last year due to increasing competition, resulting in a complete shuttering of its Midwest division. Even Amazon’s online food delivery platform Amazon Fresh found itself dethroned last year after Walmart’s online grocery sales spiked to 30 percent of the market share.
But market share isn’t the same as innovation. And neither Amazon nor Walmart are necessarily the last word when it comes to platform-to-consumer delivery. So why did one platform-to-consumer app see a 226 percent year-over-year growth rate in 2020?
The DoorDash Phenomenon
If 2020 proved to be a year of uncertainty, last years’ growth in eCommerce hasn’t just confirmed that consumers may be living in an era of unprecedented acceleration. They're also living in an era of unprecedented choice.
Choice is woven into the very fabric of digital commerce. And choice is one of the key elements to understanding how platform-to-consumer delivery adapts to changes in communication as well as consumer needs. When Amazon was founded in 1994, it fulfilled a latent need for consumers for a convenient one-stop location for one and only one product: books. Today, it’s a $386.1 Billion entity selling over twelve million items in over thirty distinct product categories—and growing at a rate no one predicted.
Especially in May of 1997, when Amazon first went public (a virtually unheard of phenomenon for a relatively unknown company formed just three years earlier) at only $18 a share. But as of 2021? It’s being traded at roughly $3000 a share.
In comparison with food delivery apps, GrubHub didn’t go public until some ten years after its founding in 2004 at $26 a share. Today, that share is only worth approximately $60. Similarly, Uber also waited ten years before its initial public offering in 2019 at $72 a share in 2019. But despite being hailed as one of the prime movers behind the gig economy, their stock value decreased significantly, with opening shares of less than $60 reported in February 2021. So why did relative newcomer DoorDash only recently decide to go public at $182 a share?
Because it fulfilled three growing consumer demands during the pandemic:
The need for contactless delivery of household essentials.
The need for optimal and fast on-demand mobile delivery.
The need to support the burgeoning gig economy—an economy that was estimated at over $1 Trillion in 2019.
DoorDash and Digital Consumer Demand
Direct online delivery may be one of the key drivers of the restaurant industry, with recent reports indicating it could reach a compound annual growth of over 15 percent by 2023. But prior to 2020, the common perception of DoorDash was simply one in a number of seemingly interchangeable food delivery services. Perhaps one of the more successful ones, yet hardly a game changer.
But the stark reality is that the disruption of the current pandemic has affected the very way consumers shop for daily essentials. A recent survey found that 68 percent of American consumers purchased groceries online between March and August of last year, with over 80 percent of respondents indicating they’ll plan on increasing their amount of deliveries in the immediate future. That doesn’t necessarily mean the death of the traditional in-store grocery experience. But it does indicate both widespread comfort and need in digital shopping.
Not just comfort and need but a widespread demand for rapid fulfillment, with almost a quarter of Americans indicating they expect same-day delivery from a retailer. DoorDash clearly recognized this demand by announcing their full scale expansion into grocery and convenience delivery in August 2020 by partnering with Walmart, CVS, 7-11, Walgreens, Meijer and Wegmans to name just a few. It may have been logical, but it was hardly original. Even with increased customer demand, it may have seemed unlikely the likes of DoorDash—an entity not even seven years old at the time—would make a debt in an increasingly saturated market.
But numbers don’t lie. DoorDash saw an 86 percent surge during its first day of trading, making its $72 Billion market valuation actually worth more than many of the national restaurant chains it delivers for. A valuation which was only 7 percent less than that reported by FedEx—and a company which DoorDash acknowledged they envisioned providing a localized, on-demand alternative to as early as 2013.
DoorDash and the Future of On Demand Delivery
Just how significant an impact on demand delivery apps like DoorDash will have on digital commerce remains to be seen. But one thing is clear: the retail industry is adopting its model with enthusiasm.
Uber’s entry into online grocery delivery actually preceded DoorDash’s expansion with their acquisition of delivery apps Cornershop and Postmates to unexpected success, reporting additional investments of $40 - $50 million during the first quarter of 2021 in anticipation of eight-figure sales by the end of the year. But the trend towards on demand platform-to-consumer delivery isn’t isolated to groceries. In September, Bed Bath & Beyond announced they were partnering with Instacart and Shipt to provide same-day delivery for holiday purchases, resulting in approximately 7 million new customers during the third quarter of 2020. Meanwhile, even luxury brands are hastening to adopt same day on-demand delivery, with Sephora’s recent announcement of an Instacart partnership being a harbinger of a prestige market struggling for increased relevance in the face of steeply declining revenues.
In 2021, customers are looking to eCommerce to help soften the impact the coronavirus pandemic has left on physical retail. It’s reflected in their demands for everything from personalized and intelligent marketing to delivery fulfillment. The strength of a brand’s customer experience is dictated by customer need. And as those needs continue to be more prominent and nuanced, so will their solutions. DoorDash may not be the “new” Amazon. But with sales revenue more than tripling during the fourth quarter of 2020, Amazon may need to reevaluate just how vital a presence an underdog can be.
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