DashPass Growth Drives Up DoorDash Revenue

Merchant partner 7-Eleven participated in summer promotion
DoorDash DashPass and 7-Eleven
Photograph courtesy of 7-Eleven

DoorDash on Wednesday said more customers and more frequent use of its tech platform for merchandise orders, including at convenience and grocery stores, pushed second-quarter revenue to a record level.

Ten years after it started as local restaurant delivery service in Palo Alto, California, DoorDash reported $4.17 billion in total revenue, including the price of the restaurant meals, grocery products and other items like 7-Eleven Slurpees ordered on the platform, for the six months ended June 30, up 36% from $3.10 billion in the year-ago period. For the second quarter, total revenue rose to $2.13 billion, up 5% from $2.04 billion a year ago.

While not profitable, the San Francisco-based company narrowed its six-month loss to $331 million from $430 million in the first half of 2022. Its cost of revenue rose 34% to $2.20 billion from $1.64 billion in the year-ago half. The company includes marketplace revenue in its total revenue and this includes revenue from foods and beverages consumers purchase using its platform, which DoorDash then gives to the restaurants and retailers it serves.

Convenience Growth

In its quest to help local businesses grow by delivering their products locally, the company has made strides, chief executive Tony Xu said during an earnings call Wednesday. While deliveries of restaurants orders placed on its platform remain DoorDash’s primary line of business, the company’s foray into grocery and convenience is picking up, the company’s executives said in a letter to shareholders released Wednesday.

“In both our international markets and our U.S. third-party convenience and grocery categories, we are driving strong year-over-year growth in volume and improvements to unit economics that are on track with our long-term targets. We believe these areas have many of the same characteristics of long-term free-cash-flow generation and impact to local commerce that we saw in our U.S. restaurant marketplace, and we are comfortable investing in them as long as we continue to progress along the paths we have established,” Xu and CFO Ravi Inukonda said in their letter to shareholders.

The executives pointed to the DashPass subscription delivery offering, launched in 2018, as a factor in the company’s strong performance. The company saw annual demand nearly triple and gross-profit-per-order double in 2019, following the launch of DashPass. More recently, its push into grocery has paid off in new customers and new orders, Xu said.

This summer, DoorDash encouraged its merchant partners to participate in a DashPass promotion. Irving, Texas-based 7-Eleven offered a free Slurpee on Fridays with a $5 order using DashPass. It also gave a 30% discount on orders over $25 for DashPass members for a week in July.

As it looks to the future, DoorDash doesn’t necessarily expect growth to come without bumps in the road. Its mission is to empower local businesses to grow providing them easy access to a new customer base of DoorDash users. When local brick-and-mortar businesses that operate “offline” attempt to compete online, they often find themselves stretched thin and further behind, Xu said. “We have to give them the tools,” he said. The tools the company provides are related to answering the question, “What does it take to solve customers’ problems?” he said.

Dasher Pay

While the executives didn’t mention an issue with driver pay, the company is facing lawsuits from 13 New York City drivers alleging $22,000 in wage theft from May and April of this year because they say they weren’t paid for all of the time they put in and were locked out of their accounts, TheCity.NYC said. The company called the allegations false and baseless, according to the report.

A local group called Workers Justice Project said it has received calls from 55 other drivers with similar complaints, and the Department of Consumer and Worker Protection is investigating, the story said. WJP said it has helped to resolve other Dashers’ complaints and recover more than $200,000 in nonpayments during a two-year period.

In their letter to shareholders, Xu and Inukonda said they see an opportunity to create more earnings opportunities for Dashers. In June, the company announced a choice program for Dashers, allowing them to either be paid per dash or “earn by time,” with a guaranteed hourly rate. This decision was designed to give the drivers more flexibility.

To succeed in a category with healthy competition from UberEats, GrubHub and others, Xu said. ”You have to be better.” DoorDash strives to offer consumers the best collection of offerings, quality, affordability and service, he said. As its order sizes grow, it’s perfecting the art of item substitution and offering more flexibility in delivery times, he said.

The company provided a financial outlook for its Marketplace GOV revenue, including a range of $15.8 billion and $16.2 billion for the third quarter and a range of $64.2 billion to $65.2 billion for full-year 2023. The company defines Marketplace GOV revenue as the total dollar value of orders completed on its marketplaces, including taxes, tips and any consumer fees. It also includes membership fees related to DashPass subscriptions, offering unlimited monthly restaurant deliveries for about $10 a month.

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