Advances in Economics, Business and Management Research, volume 203

Proceedings of the 2021 3rd International Conference on Economic Management and

Cultural Industry (ICEMCI 2021)

Qualitative Analysis of DoorDash

Yiwen Zhang1,*
1
School of Social Sciences, University of California, Irvine, California, United States, 92617
*Corresponding author. Email:yiwez@uci.edu

ABSTRACT
For the reason that phones and internet have become pervasive recently, online ordering and food delivery service
have become more popular. In 1994, the online ordering service for pizzas showed up, and in the 2000s, major pizza
chains have mature online ordering service.
This study aims to explore the qualitative analysis of DoorDash by using Michael Porter’s five-force model. For
DoorDash, its rivalry among existing competitors is strong, and the threat of substitute products is strong. Also, the
bargaining power of suppliers is becoming stronger. Meanwhile, the threat of new entrants is small, and the
bargaining power of buyers is relatively weak in the American suburbia.

Keywords: DoorDash, food delivery, online ordering, Michael Porter’s five-force model, Grubhub, Uber
Eats

1. INTRODUCTION online. From 2015 to 2020, the number of food delivery

application users have been increasing constantly, as is
With the development of technologies, more people shown in Figure 1. In 2020, because of the Covid 19,
began to get used to using applications to order food users increased much more than other years.

Figure 1: An image of US food delivery App users that are increasing each year from 2015 to 2020.

Also, the food delivery industry became crowded, fastest speed in developing among the delivery
and many companies are trying to achieve the leading companies. Whether DoorDash could begin to earn
position in this industry. DoorDash is one of the profits after its rapid development in the quarantine
platforms that offer online food ordering and food time becomes stimulating and absorbing.
delivery. It was founded in 2013, and it went public on
New York Stock in 2021. However, it is still not
earning profits, although in recent years, it had the

Copyright © 2021 The Authors. Published by Atlantis Press International B.V.

This is an open access article distributed under the CC BY-NC 4.0 license -http://creativecommons.org/licenses/by-nc/4.0/. 65
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2. RIVALRY AMONG EXISTING Korea and India. To retain its position in the industry,
COMPETITORS Uber Eats made an acquisition of Postmates which is
also a food delivery platform. This movement is the
The rivalry among existing competitors is strong. In same as what Grubhub did, and their purposes were
the food delivery industry, there are three existing identical. Ultimately, their objectives were using
companies that have relatively equal size, which are acquisition to consolidate the proportion in the food
DoorDash, Grubhub, and Uber Eats. Grubhub was delivery industry and increase their revenues, and their
founded with Seamless in the early 2000s, which is the actions could be threats to DoorDash.
oldest company among the three. For the following ten
In comparison, DoorDash was the one to be wanted
years, Grubhub and Seamless were dominant in the
to make an acquisition with. DoorDash was founded in
food delivery industry. However, as the competition in
2013, which is close to the founding year with Uber
this industry began to become intense in the early 2010s,
Eats, but DoorDash developed more rapidly than Uber
Grubhub merged with Seamless in 2013, in order to
Eats. It surpasses Grubhub in 2019 because of the
maintain its dominant role in the industry. This decision
pandemic, therefore, Uber Eats tried to merge with
represented a large and intense rivalry among existing
DoorDash in order to eliminate this tough competitor.
competitors in this industry, and it could also threaten
DoorDash didn’t compromise and “in 2020, DoorDash
the business of DoorDash. But, Grubhub was acquired
was responsible for 45 percent of all food delivery
by Just Eat Takeaway.com in June 2021.
orders” [1]. Figure 2 shows the percentage changes of
After they combined, Postmates, DoorDash and food delivery market share between Grubhub,
Uber Eats sprung up and obtained parts of orders. Uber DoorDash, Uber Easts, and Postmates from 2016 to
Eats was competing with DoorDash fiercely. Besides 2020, which shows the fact that the rivalry in food
the U.S., Uber Eats expanded its service to many other delivery industry began to be intense from 2016 and
countries at the beginning few years, but it ended plenty became more intensely at this present time.
of them in the past few years, including the service in

Figure 2: An image that explicitly shows how these major existing companies compete fiercely from 2016 to 2020.
Source. Business of Apps.

Figure 2 reflects the rapid increasing speed of Eats, and Postmates which was bought by Uber Eats in
DoorDash in five years. Nevertheless, the rise of 2020, and DoorDash offers half of these orders. If a
DoorDash leads to the fact that other companies lost new company attempts to entry in this industry, it will
their market shares and the fact that the competition in face barriers to entry. High start-up costs are the first
the food delivery industry became more fierce. problem that a newcomer must consider. After investing
a myriad of money, a newcomer needs to figure out the
3. THREAT OF NEW ENTRANTS customer problem. For the reason that customers have
been familiar with those long existing food delivery
According to the intense competition in the food platforms, a newcomer will have barriers to entry in
delivery industry, the threat of new entrants is quite low. brand identity and customer loyalty. Another aspect is
From the aspect of customer loyalty, at present, there the concern of restaurant platforms. Restaurants may
are four major companies that occupy almost all the earn less profits in accompanying with food delivery
delivery orders, which are DoorDash, Grubhub, Uber companies, as expanding direct food delivery services

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by themselves reduces the commission fees. Moreover, doing the relatively same platforms and service, and
food delivery companies have been utilized the even many restaurants on different platforms are the
explosion of orders during pandemic to make profits same. The following statistics in Figure 3 show the
and to accelerate their growth. It’s hard for new entrants percentages that customers used different food delivery
to hold the pandemic benefits. Consequently, the platforms simultaneously in the first quarter of 2021.
possibility for the companies which attempt to enter the The data in the DoorDash column shows that there is
food delivery industry is small. about 1-43% (which equals 57%) of people are loyal to
DoorDash in the first quarter of 2021. Compared to
4. THREAT OF SUBSTITUTE PRODUCTS Grubhub, Uber Eats, and Postmates, DoorDash has the
highest customer loyalty, which is a positive sign that
As demonstrated by the existing companies in this although there are several substitute products in the
industry, the threat of substitute products is large. In the market, about half of the customers would like to
food delivery industry, there are several companies choose DoorDash instead of others.

Figure 3: A table that contains the data in the field of customer loyalty in the first quarter of 2021.

Source. Bloomberg Second Measure.

Although in 2021, DoorDash “went public on the disposable income and more restaurants that customers
New York Stock Exchange at a $72 billion valuation” could choose, DoorDash chose to develop in small areas,
[1], this company hasn’t made any profit until the and other online ordering platforms haven’t been
second quarter of 2020, and yet, it has been still posting involved. DoorDash noticed that on-demand delivery
no profit. DoorDash has been “raising and losing hasn’t been served in small areas. Therefore, residents
billions of dollars to subsidize prices to gain market in the country are affected by lacking substitutes and
share” [2] for years, and substitute products can limit long driving distances to merchants. For this reason,
the profit potential of an industry. To gain more market those people could receive large benefits from on-
share, companies can only drive down the price, which demand delivery, and they could be more dependent on
could result in the rising of the orders, but it could also online ordering. For DoorDash, developing in the
result in low revenues, which is a difficulty for suburbia has benefits in light traffic and easy parking,
DoorDash or any other developing companies. Recently, which could enable the delivery drivers to become more
DoorDash has been “diversifying its offerings in recent efficient. Moreover, the price of orders from the
months by partnering with grocery stores and customers in small areas could be higher for the reason
convenience stores” [3]. But there are competitors as that each order could be ordered for a whole family,
well, for instance, the grocery delivery company instead of an individual. Also, since there are fewer
Instacart. DoorDash also has partnerships with CVS for online ordering applications, those people could be
the delivery of household essentials. more loyal to one platform. “DoorDash says they have a
58% market share in the suburbs, higher than their
5. BARGAINING POWER OF BUYERS overall market share” [4]. As a consequence, in
American suburbia, the bargaining power of buyers is
For DoorDash, the bargaining power of buyers is weak.
relatively weak in American suburbia. Although
metropolises have more potential customers with

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6. BARGAINING POWER OF SUPPLIERS ACKNOWLEDGMENTS

In the fierce competition in the food delivery and I would like to express my deep gratitude to
online ordering industry, the bargaining power of Professor Honigsberg and my research supervisors, for
suppliers became stronger than before. Since quarantine their patient guidance, enthusiastic encouragement and
was required during the pandemic, all the restaurants useful critiques of this research work. My grateful
were forced to close for months, even a year. This thanks are also extended to my teacher assistant Yoki,
situation resulted in a phenomenon that many who generously gave me her advice and assistance in
restaurants closed down and the rising of food delivery keeping my progress on schedule. Finally, I wish to
services. Hence, many restaurants chose to accompany thank my parents for their support and encouragement
food delivery platforms to make a living. However, throughout my study.
taking 15% to 30% of commission fees for every
delivery order is taking away a great part of profits from REFERENCES
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