Tech

DoorDash launches new digital convenience store channel as delivery wars heat up

Key Points
  • DashMart debuted Wednesday on DoorDash's platform for customers in eight U.S. cities: Chicago; Minneapolis; Dallas; Salt Lake City; the greater Phoenix area; Redwood City, California; and Cincinnati and Columbus, Ohio.
  • Each location will carry roughly 2,000 items across multiple product categories, including household essentials, ready-made meals, and restaurant retail items like specialty spices or sauces.
  • "It's a bit like the express lane inside of a store, whether that store is a grocery store or whether that store is a convenience store, or a pharmacy," DoorDash CEO Tony Xu told CNBC.
DoorDash's DashMart will stock and deliver its own products.
DoorDash

DoorDash is launching a new digital convenience store channel, its latest bid to grow market share in the hotly contested battle over on-demand delivery.

The new service, DashMart, debuted Wednesday on the company's platform for customers in eight cities: Chicago; Minneapolis; Dallas; Salt Lake City; the greater Phoenix area; Redwood City, California; and Cincinnati and Columbus, Ohio. The channel marks the first time the SoftBank-backed unicorn is expanding its infrastructure to include distribution centers, which will carry household essentials, ready-made meals, and restaurant retail items like specialty spices or sauces. Each DashMart location will carry roughly 2,000 items.

"It's a bit like the express lane inside of a store, whether that store is a grocery store or a convenience store, or a pharmacy," DoorDash CEO Tony Xu told CNBC. "Sometimes, you just need those things that either you forgot, or just need in high frequency." 

The undertaking appears to challenge online marketplaces like Instacart and Amazon, and more traditional brick-and-mortar retailers like Walmart and Target. But Xu stressed that DashMart's effort  is unique, beginning with the speed at which customers will receive deliveries.

"You're going to be able to get it in about 30 minutes," Xu said. "You really don't have that proposition anywhere else. So from our perspective, there was an opportunity to serve both consumers and merchants toward the goal of making sure that we can get the best of a city to the customers that live there."

The move comes as the coronavirus pandemic has crippled the food service industry, including restaurants — many of which have turned to online delivery to stay afloat. Data from Edison Trends shows DoorDash's sales surged after Covid-19 lockdown orders swept the country in mid-March. And in recent months, DoorDash has extended its market share lead over UberEats and Grubhub, capturing 45% of U.S. consumers' meal delivery sales in June, according to analytics firm Second Measure.

The food delivery wars escalated last month, when Uber announced its deal to buy Postmates in a $2.65 billion deal. While Xu declined to comment on the pandemic's impact on DoorDash's restaurant sales, he said this expansion of the core business was always part of the company's blueprint, but the pandemic expedited those plans. 

"I think the pandemic kind of accelerated some of those plans because of the need from customers," Xu said. "And those customers weren't just consumers who were trying to figure out how to get something quickly, let alone wait for a week sometimes to get deliveries."

He added that merchants were also "looking for every avenue to get sales as soon as possible, because the only way to get out of the pandemic is to grow out of it."

"You're not going to save your way out of it," Xu said.

Xu declined to comment on how the pandemic has impacted DoorDash's IPO plans, which were announced in February. In June, DoorDash confirmed it raised $400 million in equity capital in a round led by Durable Capital Partners and Fidelity, which vaulted the company's valuation to nearly $16 billion. That's up from the reported $13 billion valuation from its previous round in November. 

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