DoorDash, in what appears to be a significant move in the battle for the last mile, has rolled out DashMart. These are virtual convenience stores initially available in eight U.S. cities. More locations are planned. The company says local delivery of ice cream, sunscreen, paper towels, etc., can happen as fast as 30 minutes via DashMart.
DashMart’s are wholly owned and operated by DoorDash. The marts are really more like Amazon-style distribution centers than convenience stores. We imagine it’s only a matter of time before the term “cloud mart” or “ghost mart” takes hold. Particularly if one of DoorDash’s competitors follows suit with a copycat product.
From Convenience to DashMart
The company positions DashMart as a natural progression of recent moves to make itself more indispensable to consumers in the COVID era. This includes the introduction of its “convenience category” in April. This initiative involved the inclusion of inventory from 2,500 convenience store locations in 1,100 markets.
This is how DoorDash spun that introduction back in April.
‘Our daily lives have been upended, and with many families at home all day, basic household essentials are, well, more essential than ever. To help you get access to the supplies you may need to maintain a well-cared for and healthy at-home environment, DoorDash is partnering with regional and national convenience stores across the U.S.—including 7-Eleven, Wawa, Casey’s General Store, and CircleK—to offer you essential household products on demand, delivered straight to your doorstep through a no-contact drop-off option.”
One twist on DashMart is it offers local restaurants a retail outlet for packaged inventory. Here is how DoorDash describes DashMart.
“DashMart is a new type of convenience store, offering both household essentials and local restaurant favorites to our customers’ doorsteps. On DashMart, you’ll find thousands of convenience, grocery, and restaurant items, from ice cream and chips, to cough medicine and dog food, to spice rubs and packaged desserts from the local restaurants you love on DoorDash. DashMart stores are owned, operated, and curated by DoorDash.”
Owning the Last Mile
So just four months after launch, DoorDash appears to be going into competition with its convenience partners — 7-Eleven, Walgreens, CVS, and so on. It will be interesting to see how these organizations react to this development.
The bigger picture is how this move positions DoorDash is the ongoing battle for the last mile with rival delivery companies. Uber recently acquired Postmates in order to move its UberEats division into a stronger competitive position against not just DoorDash and Instacart, but also, presumably, Amazon, Walmart, and Target. Recent data from Second Measure shows that DoorDash has been gaining share in the meal delivery space. It now commands a 45% share vs. UberEats’ 24%.
Meals Are the Tail, Groceries Are the Dog
It’s unclear how long this move has been in the works at DoorDash. But to us, it looks like a counter-move against Uber, as well as a proactive move to own more of the local delivery footprint. And by local delivery, we mean more than just meals.
As we noted in this post, written in the lead up to Uber’s Postmates acquisition, in the increasingly intense competition for local delivery share, meals are the tail, groceries are the dog.
If every household chooses to order via a delivery app even 12 times a year — up from the current eight times a year — that would yield about 1.5 billion annual orders. At $7 per order, that translates into about $10 billion in revenue for the U.S. restaurant food delivery business.
That’s a lot of money. But when you think about the grocery delivery business, it’s chump change. A family of four probably needs at least $150 per week in food or $600 per month. If you assume grocery delivery is a semi-weekly event, that is 26 delivery orders per year. With players like Instacart, Walmart, and Amazon deeply into the grocery delivery business, it would seem that they would be the most logical players to consider entering the restaurant food delivery business.
Uber CEO Dara Khosrowshahi made a similar point on the company’s recent Q2 earnings call. Uber sees that the space UberEats occupies as much bigger than just meal delivery.
“As far as the delivery segment goes, look, the U.S is a very competitive market. Obviously, you’ve got DoorDash. You’ve got Grubhub. But then you’ve got Amazon in the marketplace. You’ve got grocery players, etc. This is a broad market. We don’t define it as just food…We’re really thinking about overall local commerce, and we see lots of competition. But also, we see a very large category, a historic kind of demand wave behind us. And we think within a competitive environment, we can have constructive margin profiles going forward.”