DoorDash Sets Its Sights on GrubHub in the Battle for Local Delivery

Local delivery is a good space to be in right now — just ask DoorDash, an on-demand logistics company offering an ordering and delivery platform for dine-in restaurants without those services. The company recently raised $40 million in venture capital and is expanding to new locations across the country to take on Grubhub and a host of other competitors.

Street Fight recently caught up with Prahar Shah, DoorDash’s head of sales, to talk about what’s different this time around and how delivery could shake up the local marketing industry. (Shah will be joining us as a speaker at Street Fight Summit West in San Francisco on June 2nd. More info and buy tickets here.)

In many ways, the promise of local delivery was one of the hallmarks of the dot-com boom. Can you talk about what has changed in the delivery model since the 2000s that makes it not only more efficient, but sustainable overall?
The biggest [change] is infrastructure. Companies then were relying on a lot of distribution centers and creating a lot of infrastructure to make it happen. Logistics is hard. There are very few companies that have been able to scale a logistics company nationally or internationally. Another one of the big changes is the advent of the smartphone and mobile. You can leverage the power of the people that are already out there, akin to Uber and Lyft and these sorts of models. They can be your logistics company.

We don’t need to create the infrastructure; we’ve built software and tools to make that entire marketplace more efficient and more effective. It allows us to achieve a lot of the dreams companies had from the dot-com boom — being able to deliver almost anything in an hour or less, and do it with a much more capital-efficient model.

The technology industry often assumes that what works in NYC and SF will work elsewhere. But both cities are unique, both in density and wealth. Do you believe that same-day delivery is a product unique to the large metropolis, or is it something that can be applied to secondary urban markets and even suburban areas?
We started off in Silicon Valley, which is made up of several suburbs: Palo Alto, Mountain View, Redwood City. These aren’t New Yorks or Chicagos. Most companies start in San Francisco because it’s much more of a metro city than Silicon Valley. But we believe in testing extremes, testing harder stuff. If you can achieve success on the hard things, you know for sure you can work on the easier ones. Instead of starting in San Francisco, we started in Silicon Valley, with great success.

We had one in four, one in five households using DoorDash in Silicon Valley. Then we went, what’s our next city? San Francisco? That makes sense. But no — instead, we went to San Jose. We went to a more extreme suburb. More of America looks like San Jose than San Francisco. That’s the way we’ve approached it. We’ve seen consistent growth and consumer interest, we’ve seen just as much interest in San Jose as San Francisco.

Uber has been experimenting with using its driver network for food and other deliveries. Do you see Uber as a potential competitor?
We’re building software and technology, building tools for each side of our market, from our Dashers to our consumers to our merchants. We’ve got a whole set of products just dedicated to our merchants, the restaurants we work with. That’s actually quite different from a lot of the other companies that are out there. If another company did want to look into the space, I think what they’ll realize is, you’re operating on razor-thin margins in order to do it really efficiently. You have to build software and you have to build tech, and that tech needs to then translate into profit.

We realize we’re building a logistics company, and building an on-demand logistics company is hard, and to do it in a profitable manner and succeed and be around for 20 years is even harder. At some point, you’re not just leveraging venture capital to continue to operate — then it’s just a race to the bottom. That’s how we view it.

Does DoorDash plan on moving beyond restaurant orders?
Definitely the grander vision is being able to deliver anything on demand. The challenge is that each vertical is extremely different. If you want to do it in a very basic, trivial manner, then sure, you can get someone to pick up something and deliver it — that’s easy. Why do people really love DoorDash? The way it works is not you reaching out and hoping someone in the network will accept your order. We assign that order to someone, and that person is already on shift and ready and willing to go collect that. We’ll take the same vigor with food delivery to whatever other vertical we enter.

We’re seeing a lot of different people attack different verticals. We’ve specifically focused on food because we believe it’s probably one of the hardest. When you’re thinking of delivering a sweater, you’re not thinking about whether the sweater is fresh when you get there. We very purposefully have gone after probably the hardest market of all. And there’s a huge market just for that, so we’re very focused on that right now. If and when we decide it’s time to enter a different vertical, we’ll be prepared.

Grubhub and Seamless recently bought a delivery company, blurring a long-held line between online ordering and delivery/logistics. What do you think of the acquisition, and do you see these two parts — the actual challenge of getting orders to merchants and then the process of getting goods to consumers — as two parts of the same coin?
A delivery company needs to be built from the ground up. You can do online ordering really well, but that doesn’t mean you can also do delivery really well. I don’t know if by just adding delivery, when you haven’t made it a core part of the product and the way you built your company, whether you can be successful or not. We’ll see. Ultimately the customer will choose.

Do you characterize Door Dash as an online ordering company or a delivery company?
We’re both. We connect the merchants and restaurants with consumers. We provide the online and mobile ordering components. We’re looking at millennials, thinking about all of these new segments of the population and that the smartphone is at the forefront for them. We allow them to do both mobile and web. And we also help the merchants by being able to deliver. While traditionally Grubhub and Seamless delivered to the fraction of the entire market that has their own drivers, we can serve the entire population, the entire market. These local businesses, whether they have their own drivers or not, we can provide them.

Miller Coors recently partnered with the delivery startup Drizly to allow consumers to order Miller Lite through an e-commerce site. Can you talk a little bit about the role of these services as a new local marketing channel for brands, and how that may figure into DoorDash’s roadmap?
There’s no question that local marketing and using DoorDash for merchants is a new way to attract consumers. They’re generally incremental customers, too. When we talk to a lot of our restaurant partners, we hear GMs say “You helped me hit my number.” It’s new dollars, not replacing dollars they’re already getting. It’s incremental, it’s customers that didn’t want to drive in, walk in, eat in. They probably would have ordered somewhere else, because Cheesecake Factory typically doesn’t deliver.

But a lot of these companies that are doing so well on our platform, it’s just giving them a whole new audience to attract, and a whole new marketing channel that comes with revenue. That speaks volumes for any local business. We’re definitely seeing that on the order side — the fact that we’re attracting hundreds of thousands of people to your restaurant, and directly converting that into sales.

Annie Melton is a contributor to Street Fight.

See DoorDash’s Prahar Shah on a panel about the rise of local delivery services at Street Fight Summit West in San Francisco on June 2nd. More info and buy tickets here.