The $65-a-share agreement, announced Oct. 29, still needs approval from Instacart shareholders and must meet other closing conditions. DoorDash plans to support the Instacart brand, put its restaurant listings on Instacart and give DashPass members access to both subscriptions for the price they pay today. CEO Tony Xu said Instacart has a loyal audience. He also said much of what he wants to do with the business will be invisible to the people using either app.
For example, judging from the earnings call, consider the shopper who wants to buy groceries directly from a favorite local store. Instacart has spent more than a decade building software that lets grocers take orders through their own websites. DoorDash can supply the delivery. The grocer gets to keep the customer relationship, including the data that helps it decide which offers to send the next time that shopper needs groceries.
“You combine that with our first-party logistics capabilities, which we pioneered with DoorDash Drive also over a decade ago, and you can offer merchants the ability to build the best-in-class first-party experience for fast delivery, their own loyalty programs, their own data, their own customers,” Xu told an analyst who asked why DoorDash wanted to buy Instacart when its own grocery business was doing well.
What Instacart Brings to the Grocery Order
One reason Xu wants Instacart’s order volume comes down to what’s actually on the shelf. DoorDash already manages thousands of items for retailers including Giant Eagle and Albertsons. Xu said delivery accuracy at its DashMart locations, where DoorDash controls inventory, is close to perfect. For orders filled at third-party stores, he put accuracy in the low 90% range. Managing inventory carries fixed costs. More orders from Instacart shoppers would help spread those costs and put more deliveries in the same neighborhoods, which Xu expects would bring down delivery costs and shorten wait times.
There’s also money to be made before a driver picks up an order. Chief Financial Officer Ravi Inukonda told analysts that consumer brands could reach more shoppers with ads across the two services. DoorDash could sell Instacart’s online storefront software to grocers it already serves and offer its DashMart fulfillment service to retailers on both platforms. Management plans to put the first year’s gains from combining the businesses back into the product. By year three, Inukonda expects the combination to contribute $500 million annually to the bottom line after those investments.
Where AI Fits in the Order
The arrival of generative artificial intelligence gives shoppers another way to decide what to buy. Ask DoorDash can suggest an unfamiliar restaurant based on what someone usually orders or help put together a grocery basket. Text DoorDash lets customers order by text outside the app. The company has also built a connection that lets outside AI assistants help with tasks such as ordering lunch for an office.
So far, few shoppers have handed the order itself to an outside agent. Xu said third-party AI agents had generated only several hundred orders in total since they began operating. For everyday food purchases, customers still tend to open DoorDash themselves. He sees more promise for agents when a purchase takes time to consider or when an assistant can anticipate something a customer needs. He also sees room for advertising if shoppers start using those services more often.
For now, DoorDash is putting substantial resources into the part of the transaction that an assistant can’t complete on a screen. As Xu put it, “The hard part is making sure that they actually show up and show up in the way that you expected, in the condition that you want.”
DoorDash reported third-quarter revenue of $4.6 billion, up 34% from a year earlier. Total orders rose 28% to 993 million and the gross value of orders on its marketplaces grew 36% to $33.9 billion. Net income attributable to DoorDash common shareholders rose 91% to $466 million.
