DoorDash analysts remain optimistic as the company expands from delivering restaurant orders to delivering everything

DoorDash now has more than 75,000 non-restaurant stores on its app.

DoorDash

• About 14% of DoorDash's monthly active users order from categories outside food.
• Analysts are bullish on DoorDash's momentum in adding retailers, which surpassed 75,000 last month.
• "DoorDash is going to strangle Instacart using their own system," a food-supply-chain expert said.

DoorDash CEO Tony Xu recently said his delivery app was known for bringing customers lunch and dinner. But it's always been the plan to deliver more.

Today, DoorDash is leaning heavily into multiple categories of on-demand delivery — from farm supplies to groceries to household goods.

"We are hyperfocused on selection, and we are excited about the progress we've made towards connecting every grocery, convenience, and retail store to every local consumer," Shanna Prevé, the vice president of business development at DoorDash, told Insider.

Ahead of DoorDash reporting third-quarter earnings on Thursday, analysts are also excited about the company's expansion beyond hot-meal deliveries. Expanding selection has made DoorDash resilient as restaurant-delivery growth declines and recession worries grip consumers, analysts say. Restaurant delivery was down 7% in September compared with last year, but it was up 95% compared with September 2019, according to the market-research firm NPD group.

Total orders on the app continue to grow but at a much slower rate compared with the triple-digit increases earlier in the pandemic. In the second quarter, total orders on the DoorDash platform grew 23% to 426 million. For the same period in 2021, orders increased 69% to 345 million. Still, DoorDash, like other delivery players, isn't profitable.  

"DoorDash's greater selection, convenience, and value are proving resilient," Andrew Boone, a JMP Securities analyst, said in a note earlier this year.

Retail merchants on the DoorDash app have nearly doubled in a year. 

Last month, DoorDash surpassed 75,000 retail stores on its platform, up from 40,000 a year ago. DoorDash's nonrestaurant store count matches the merchant selection on Instacart, which started delivering groceries eight years before DoorDash. In addition to grocery partners, DoorDash delivers for retail brands such as Sephora, Big Lots, PetSmart, Dick's Sporting Goods, Target, Total Wine & More, and Office Depot.

In earnings reports this year, DoorDash said 14% of DoorDash's 25 million monthly active users ordered from categories outside food. 

New verticals are "quickly gaining momentum," Mollins wrote.

Analysts also point to DashPass, DoorDash's membership program, as an essential feature that brings stickiness to the app.

"DashPass should drive increased frequency," Mollins wrote. 

Another benefit of DashPass is subscribers tend to be less concerned about penny-pinching amid high inflation. 

"DashPass members skew higher income relative to the national average, which we and others have pointed to as a potential hedge against a slowdown in spending from lower-income consumers," Mollins said. 

Nicholas Cauley, an analyst at Third Bridge, said as "DoorDash focuses more on expanding partnerships, it will inevitably take share of new delivery users from competitors." 

The retail analyst Gary Hawkins agreed, saying Instacart should start worrying as DoorDash acquires more of the same merchants as it. Last month, DoorDash added Dick's Sporting Goods and Sprouts, available on Instacart since 2020 and 2018, respectively.

"I think that's going to become a headache for Instacart at some point," Hawkins, who leads the Center for Advancing Retail & Technology, said. 

DoorDash is already becoming a dominant player over Instacart and Gopuff in the convenience sector, according to anonymized transaction data collected by the market-research firm YipitData. 

As of August, YipitData said DoorDash owned 37% of the market, compared with 18% for Gopuff and 16% for Instacart. The data, which excludes grocers, is based on third-party deliveries from stores such as 7-Eleven, Walgreens, Wawa, CVS, Casey's, Sheetz, and Rite Aid.

DashMarts, the company's delivery-only convenience stores, increase DoorDash's control of convenience-market delivery to 45%, according to YipitData. DoorDash opened the first DashMart in 2020, and the convenience stores have grown to 25 locations in cities in the US and Canada.

"DoorDash is going to strangle Instacart using their own system," the grocery and supply-chain consultant Brittain Ladd told Insider.

"Food delivery, DashMart, and online grocery fulfillment and delivery are key to profitability for DoorDash," he added

Still, Third Bridge's Cauley noted that grocery margins were thin and required sufficient volume to drive profitability.

"Expanding the nonfood business is a revenue and market-share play," he said, "but may require DoorDash to operate on lower margins in some situations, especially if it is trying to win or take merchants from competitors."

Read the original article on Business Insider

Contributer : Business Insider https://ift.tt/3c0Deyw

Something that you might miss to see?