The app-based delivery company DoorDash Inc. added grocery delivery to its app, making itself the latest competitor in a same-day delivery segment dominated by Instacart Inc.
Starting last week, California DoorDash users in the Bay Area, Los Angeles, Orange County, Sacramento, San Diego and the Central Coast could order from Smart & Final, a grocery warehouse chain. Customers in Chicago, Cincinnati, Milwaukee, Detroit and Indianapolis can order from the grocer and mass merchant Meijer Inc. (No. 73) and Fresh Thyme Farmers Market, which specializes in organic food.
In the coming weeks, DoorDash says it will add more grocers, such as Hy-Vee, Gristedes, D’agostino and others. At that point, DoorDash says, more than 75 million Americans will have access to its grocery delivery service.
DoorDash says it will make grocery deliveries in less than an hour and offer more than 10,000 grocery items, including dairy, eggs, produce and fresh meat and fish. The DoorDash service also offers ready-to-eat and refrigerated meals from numerous grocery chains. Stores will handle the picking and packing of orders, either by using their employees or hiring workers via an arrangement between DoorDash and staffing firm Adecco USA Inc. As it does with restaurants, DoorDash will provide “dashers” to pick up and deliver prepared orders.
DoorDash already provides a white-label fulfillment service for grocery chains including Walmart Inc. (No. 3 in the 2020 Digital Commerce 360 Top 1000), Hy-Vee, and Coborn’s. The delivery service will add grocery items to its in-app marketplace, which already includes restaurants and convenience stores. Contractors provide white-label products or services that are branded by the company hiring the contractor.
Unlike some grocery-delivery options, the DoorDash service is “truly on-demand,” with no need to set up a time window, the spokeswoman says. Meaning shoppers receive their groceries in 1 hour compared with selecting a window that could be hours after they purchase. In that way, DoorDash grocery delivery is similar to the Instacart Express service.
The fees for grocery deliveries depend on the size of the order. Grocery delivery is also available on DashPass, DoorDash’s subscription service that provides unlimited deliveries of orders of $15 or more for $9.99 per month. A DoorDash spokeswoman says the new service adds value to existing DoorPass memberships and has the potential to bring in new DoorPass members.
Earlier this month, DoorDash launched fulfillment centers in eight cities to fulfill essential grocery orders. That service, called DashMart, offers delivery of convenience-store products—such as chips, ice cream, spices, beverages, sunscreen, cough medicine and dog food—in 30 minutes or less. Over the coming months, DoorDash plans to launch DashMart in more U.S. cities.
Grocery delivery demand soars
Demand for grocery delivery services has grown tremendously since the beginning of the COVID-19 pandemic. According to data released earlier this month by research firm Second Measure, sales via grocery delivery services increased 146.0% year over year in the second quarter of 2020. Instacart is the largest competitor in the grocery delivery business, with a 48% market share in June, Second Measure says.
DoorDash is hardly the only business to recognize an opportunity. Last week, online grocery retailer FreshDirect LLC (No. 71) said it would expand delivery capacity in Westchester, New Jersey, Connecticut and Long Island. It’s doing so to accommodate what it called “a 100% growth surge in its suburban footprint.” It also plans to hire 350 full-time employees through mid-September.
In a statement, David McInerney, co-founder and CEO of FreshDirect, said it is increasing its suburban capacity because “as more people relocate to the suburbs as a result of the pandemic, they are taking FreshDirect with them or trying us for the first time and never looking back.”
FreshDirect also plans to extend its seasonal delivery in the Hamptons—a group of seaside communities on New York’s Long Island that is a common summer destination for affluent New York City residents—for the foreseeable future.
“The decision to extend our service to the Hamptons is a direct response to the many customers who have decided to stay in that area for the foreseeable future due to the pandemic. We wanted to extend the opportunity for them to have a safe grocery-buying alternative for the rest of the year,” McInerney said in the statement.
After a customer survey, the retailer found 76% of customers in the Hamptons plan to extend their stays beyond the summer, FreshDirect reported.