DoorDash Shows Rivals What It Can Eat

"After an underwhelming update from Uber Eats parent Uber Technologies last week, U.S. food delivery market-share leader DoorDash had investors eating out of its hand on Wednesday evening.

The company said it boosted gross order value for its Marketplace business, which includes delivery, by 70% in 2021, after more than tripling it in each of the preceding three years. Fourth-quarter results show it continues to dominate the delivery space domestically and has big ambitions to continue its success abroad.

While Uber Eats' business only just turned profitable for the first time in the fourth quarter on the basis of adjusted earnings before interest, taxes, depreciation and amortization, DoorDash has been profitable on that basis for seven consecutive quarters now. Compared with Uber Eats' broad global presence, DoorDash's international footprint is still small. But recent moves from DoorDash, including its November announcement that it would spend $8.1 billion to buy Helsinki-based delivery platform Wolt, have been well received. Indeed, the combination of continued gross order value growth and aggressive investments in new categories and international markets had investors hungry, sending DoorDash shares up 26% in after hours trading.

The global delivery market is no doubt several times larger today than it was just a few years ago, but not all companies have capitalized as well. In its investor day presentation last week, Uber touted the fact that its delivery business is now three times as large as it was when the pandemic began, comparing annualized gross bookings as of the fourth quarter of 2019 to those of the same period last year. But DoorDash's gross order value on its Marketplace business platform was roughly 5.2 times higher last year than it was in 2019.

In the U.S., at least, DoorDash continues to outperform Uber Eats on many measures. Data from Bloomberg Second Measure show DoorDash owned 58% of meal delivery sales nationwide to Uber Eats' 24% as of January. The data also show DoorDash's customers spent 9% more on average than their counterparts at Uber Eats over a one-week period in late January on the companies' respective platforms.

DoorDash's loyalty program seems to be a large part of its success. The company said Wednesday it had over 10 million DashPass members as of the fourth quarter, up from over nine million a quarter earlier. YipitData shows DashPass subscribers are responsible for more than half of DoorDash's domestic gross food sales and are roughly 40% of its monthly active users in the U.S. Some 90% of DashPass members joined by paying full price on a monthly or annual basis or by starting with a free trial, while just 10% joined through a credit-card loyalty program. DoorDash said Wednesday that DashPass members have higher retention and order frequency than nonmembers.

Data also show DoorDash has been eating Uber's lunch in related U.S. markets as both platforms furiously work to expand delivery options from meals to grocery, alcohol and convenience. More than 12% of DoorDash's monthly users had placed a nonrestaurant order as of January versus less than 6% for Uber Eats users, according to YipitData, which also shows DoorDash's convenience business as a percentage of gross food sales is significantly higher than that of Uber Eats.

For Uber, calling a delivery platform "Eats" when its growth depends upon its ability to also deliver things you can't eat was clearly a marketing error. It is one the company paid millions to make light of and try to rectify on Sunday in a Super Bowl commercial jam packed with celebrities attempting to eat things like diapers, soap, candles and lightbulbs. But Uber's need to spend massively on such a big stage to promote newer verticals isn't merely an illustration of a competitive shortcoming; it also shows the significant growth the industry has enjoyed over the last two years is decelerating.

DoorDash's full-year outlook implies growth in gross order value for Marketplace of less than 17% at the midpoint, a further 19-percentage-point deceleration from the annual growth rate it put up for the segment in the fourth quarter.

Wednesday's effusive investors had better hope it can deliver." [1]

1. DoorDash Shows Rivals What It Can Eat
Forman, Laura. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 18 Feb 2022: B.12.