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- DoorDash launched same-day delivery service for more than seven major retailers in 2021.
- It’s part of a long-standing strategy that could help the efficiency and economics of the business.
- Logistics experts say direct competition with UPS and FedEx one day is very plausible.
Gig economy delivery companies, which largely started out delivering for restaurants, are making moves toward broader retail deliveries. After a flurry of announcements at the end of 2021, DoorDash is emerging as perhaps the most aggressive.
The company has been adding partners outside the restaurant world to its roster for more than a year — Walgreens, Walmart, CVS, Walgreens, 7-Eleven, to start — putting it in direct competition with Instacart. But as the company adds more retailer categories, it’s emerging as a potential competitor for package delivery players too.
Moving in on retail
When it started up in 2013, DoorDash offered delivery from all sorts of local merchants, before focusing on food and eventually overtaking rivals Grubhub and
. Now with dominant market share, it’s back to moving everything from pet supplies to
Macy’s was one of DoorDash’s earliest partners without a food element. In 2021, the company onboarded PetSmart, Bed Bath & Beyond, Buybuy Baby, Lush, Ulta, Shoe Carnival, JCPenney, and Pacsun, a DoorDash spokesperson confirmed via email. The latter four retailers were all announced in mid-December — just as holiday season shipping cutoffs for UPS and FedEx arrived.
“Refining our operations and offering same-day delivery not only allows us to satisfy our consumers needs more by fulfilling orders in real-time, but it will also decrease the probability for cart abandonment during the holidays,” Pacsun’s Mimi Ruiz, VP of eCommerce said in a statement.
Same-day delivery allows retailers to grab more sales from customers who want goods immediately, and to keep inventory moving for those who can’t easily ship e-commerce orders from stores. Especially given continuing supply chain delays, making more inventory available to customers is a plus.
“Look at Bed Bath & Beyond. Those stores — there are so many of them and they’re so under-leveraged,” said Dean Maciuba, managing partner of Crossroads Parcel Consulting and a 35-year FedEx veteran.
Cowen projects delivery sales to reach $63 billion in 2023. The sector is growing but profitability has eluded most of the major players, which is why many are expanding operations to include other types of delivery.
DoorDash diversifying makes sense, Maciuba said. Since its deliveries are concentrated around mealtimes, drivers are likely to jump to other platforms during the doldrums. Adding retail deliveries may keep them on the app for more.
“Maybe if they can create an environment where they have stuff during the day, they can have a more stable relationship with their service providers,” he said.
Mind the gap
One big question for DoorDash is can it grow this business beyond local? Without its own warehouses in the mix, its drivers must pick up and deliver everything in the same day, which makes the usual tricks of logistics efficiency tough.
“They have no capability to do it outside of a single market because they have no infrastructure,” Maciuba said. New worlds of possibility open up with the ability to hold packages overnight and enable longer distances.
A DoorDash spokesperson said the current delivery radius is based on a variety of factors, including what the type of retailer, how many stores it has in a given area, and where those stores are. Retailer deliveries can travel outside of single neighborhoods, they said, and non-perishable items can safely travel farther than food.
Target is implementing what may end up being a roadmap for gig-economy delivery companies that want to get away from same-day and into next-day or even longer delivery times. The retailer is in the process of building a network of warehouses to sit in between the stores and Shipt’s gig drivers.
DoorDash it is still far from the capability of a UPS or FedEx, Maciuba said. But, the trajectory toward something competitive, if not identical, is very plausible, experts said.
In November, DoorDash launched a program that goes beyond its on-demand wheelhouse: It now delivers food from well-known merchants like Katz’s Delicatessen and H&H Bagels to consumers across the US, with next-day or two-day delivery. But it’s not Dashers doing the last-mile deliveries, a spokesperson said. It’s FedEx and UPS.