Can food delivery specialist DoorDash go beyond delivering hot food to your door to dropping off stuff like diapers and electronics? Not at the moment, but that's ultimately where the tech unicorn's ambitions lie.
X"If you can deliver a burrito hot or you can deliver ice cream that does not melt, you can deliver anything," DoorDash CEO Tony Xu told Investor's Business Daily at retail industry conference Shoptalk on March 20.
The San Francisco-based food delivery service serves over 100,000 businesses across 600 cities in the U.S. and Canada. DoorDash recently announced plans to nearly triple that to 1,600 cities, thanks to a SoftBank-led $535 million round of funding. Food courier rivals include Grubhub (GRUB)-Seamless, Postmates and Eat24, which Grubhub bought from Yelp (YELP) last year. UberEats, another player, is the main delivery partner for McDonald's (MCD).
But whether DoorDash and its peers find success beyond hot food delivery is a question mark. Hot food is a high-margin arena, McKinsey analysts say, and players who aren't in a clear lead will have to find new growth markets.
"For the many runners up, a new hunting ground is needed, but it will be hard to come by," they wrote in a July 2017 report. "Markets such as groceries or nonfood retail do not offer the same rare combination of high gross margins and high urgency as hot food does."
Amazon Enters Food Delivery Field
Even Amazon (AMZN) is in the mix. The online sales giant partnered with food delivery firm Olo in September, offering the Olo's restaurant database on Amazon Restaurants, including Chipotle (CMG), Shake Shack (SHAK) and Wingstop (WING). (The announcement pinched Grubhub stock for a session.)
And Facebook (FB) rolled out a new food ordering feature in October, with DoorDash as one of its third-party couriers.
"One of the hardest things about restaurant delivery is knowing where all the offline assets are," said Xu. "Where are the parking spaces? Which line should we enter to pick up the food? Do we enter through the front door or the back door? All of these things are things we first must digitize, then study, then build into the product itself."
As it looks to expand to 1,000 more cities, maintaining quality is tough, he said. But Xu intends for DoorDash to become a "last-mile logistics layer" in which "you'll be able to see us deliver any type of good."
Still, McKinsey analysts asserted in July that profitability will be "out of reach" for startups trying to expand beyond hot food. That is, "unless they reinvent themselves and address the limitations of their instant delivery model."
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The post Grubhub Rival DoorDash Wants To Expand Beyond Food Delivery, Says CEO appeared first on Investor's Business Daily.
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