DoorDash sees 'rapid growth' in grocery delivery

DoorDash Inc. reported strong sales for the first quarter of 2023, and “outsized growth” in its grocery and convenience store sales, during the San Francisco-based tech company’s earnings call on Thursday. 

Total orders grew 27%, to 512 million, for the quarter, and revenue at the company leaped 40%, to more than $2 billion.  

DoorDash noted that it continued to make “significant investments” in the non-restaurant side of its business, which includes grocery and convenience store deliveries. “Total orders from our non-restaurant categories in Q1 2023 remained significantly higher than year-over-year growth in our U.S. restaurant category,” the company noted in its quarterly report. “Based on third-party data, we believe we gained category share in the U.S. convenience and U.S. grocery categories during the quarter.” 

DoorDash CEO Tony Xu credited the strong performance in the grocery and convenience categories to “improvements in product quality.”

“So adding selection, players like Aldi ... we now serve 20-plus of the top grocers in the U.S.,” he said, according to a transcript from financial services site Sentieo.  

That partnership with Aldi was announced in late February and includes locations in 38 states. “By partnering with DoorDash, we can conveniently bring our award-winning, fresh and affordable groceries to even more of our customers’ doors with the click of a button,” Scott Patton, vice president of national buying at Aldi, said in February.  

Xu added at the Q1 earnings announcement that the company also is continuing to improve the quality of the DoorDash experience for grocery shoppers, "making sure that we are more accurate both in the filling of the carts, the ability to perfect the substitution experience when the items that we shop for are not inside the store.” 

“And we're also doing this with greater convenience by allowing you more choices of whether you want this delivered in 30 minutes, whether you want it delivered a bit later in the day,” he said. “And so for all of those reasons, that's why you're seeing the cohort performance improve in new categories.” 

Xu said that while DoorDash has made “tremendous strides” in its penetration into the grocery market, he believes the company still has “a long ways to go from the perspective of building the product.” He noted that the grocery delivery business lags behind the company’s restaurant delivery business.  

"And I think that's because the offline experience is still superior to the online experience, which means we have a long way to go to making sure that we can make the quality of the experience perfect, meaning you get exactly what you order, that you can get it from all the places that you want delivery from and that the prices are affordable or what you would expect to pay in store,” he said. 

Improvement of the DoorDash grocery experience, in part, is focused on making sure orders include as few product replacements as possible, according to Xu.  

“A big part of this stems from the fact that today, physical stores, grocery stores, that is, don't always know exactly what's on their shelves. And that's quite a hard problem to solve for a variety of reasons,” he said. “We can literally go on for hours to talk about all of the different reasons. But that's the problem that we've gotten better at in terms of making sure that we can get you exactly what you ordered.  

“I'm not saying we're perfect. And I mentioned, I think to an earlier question, that we're still a long ways to go in terms of where I want to see this product experience. But I think we've made tremendous strides in the two years that we've been doing this.” 

The growth of its grocery delivery service should come as no surprise, considering the resources DoorDash has put into promoting the new vertical. In March, the company increased the delivery options for shoppers, enabling them to schedule their orders further in advance or to receive them faster if necessary. It also enhanced its search function by letting customers view their previous orders. 

The company also made a huge marketing push earlier this year, placing an ad in the 2023 Superbowl titled “We Get Groceries,” which featured celebrities such as Raekwon The Chef of hip-hop supergroup The Wu-Tang Clan and Matty Matheson of the Hulu series “The Bear.” 

DoorDash also released its own credit card, the DoorDash Rewards Mastercard, in early March that offers 4% cash back on DoorDash and Caviar purchases and 2% on all other non-DoorDash grocery purchases.