In what could be the start of an important pivot for its business model, DoorDash is moving into the same-day grocery delivery space.
It was one of the biggest IPOs of 2020, and now DoorDash (NYSE: DASH) is moving its business model on to the next natural step for a food delivery company:
Same-day grocery delivery.
Eh, y tho?
To some, food delivery is a young industry with lots of promise. To others, DoorDash is competing with the likes of UberEats, GrubHub, Postmates, and much more in a vicious race to zero.
In an oversaturated industry, these competitors are just continually underpricing each other in a loss-leading strategy to gain market share, which will eventually end with a ‘last one standing’ scenario. Not to mention the already poor margins for food delivery and the restaurant business in general, which can be as low as 3%. Luckily for DoorDash, it holds the largest market share in the U.S. at more than 50%, meaning that it can probably hold out longer to remain top dog in food delivery.
But a race to zero doesn’t excite shareholders, and other business avenues are needed. In steps same-day grocery delivery.
Yesterday, DoorDash announced its partnership with Albertsons to offer on-demand grocery delivery from nearly 2,000 Albertsons stores, including Safeway, Vons, and Jewel-Osco. The idea is that DoorDash can help large chains such as this to compete with the likes of Amazon and Walmart.
COVID-19 has reshaped the way consumers live their lives, with a quarter of U.S. shoppers intending to order online more post-pandemic, according to recent surveys.
Although it is far from the only player in the game, it is certainly the biggest, and DoorDash is expanding itself to become so much more than fast-food delivery
It’s early days, but investors should keep an eye on DoorDash’s non-restaurant delivery services in upcoming financial reports to see if there’s a hidden golden opportunity lurking under the surface.
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