DoorDash And Keeping Pace In The Delivery Race After Losing A Step

In many ways, 2019 started out strong for DoorDash earlier this month.

The San Francisco food delivery startup brought in $400m in new funding as part of its ongoing quest to claim the crown as the biggest delivery player in the tight and highly competitive U.S. on-demand market.

The latest round valued the company at $7 billion — and brought the firm's total fundraising over the last six years to $1.4 billion.

The market it moves in, however, is crowded. Competition includes the food-focused players like GrubHub and UberEats, as well as the general delivery movers and shakers like Postmates and Instacart that are increasingly straying into DoorDash’s meal delivery on-demand space.

But Co-Founder and CEO Tony Xu remains unfazed by the competition and focused on the uses for the new funds including expanding its geographic reach to expanding its delivery offerings to include things like grocery and other retail goods. The firm also plans to double up on its staff this year.

“We’re going to double down on what’s working for us,” he said.

And in so doing, the company hopes, double down on growth, which has been strong. According to Xu, year-on-year delivery volumes growth jumped from 250 percent as of August 2018 to 350 percent currently. That growth, he noted, comes as DoorDash has added more restaurants to its platform, expanded its geographic footprint and added consumers to its subscription service.

Full speed ahead?

Yes, but with a pretty notable asterisk.

Because like many firms that experience extremely rapid growth, DoorDash is suffering a common side effect: growing pains.

Shortly after the big funding and valuation jump was announced, the meal delivery company found itself under intense and persistent fire for how it pays its delivery workers. Specifically, it was one of many firms accused of essentially pocketing workers' tips.

DoorDash wasn’t alone: Amazon Flex and Instacart were also caught up in the accusations of taking workers' tip money and using it to subsidize base pay. The policies around that aren’t new, but went viral and attracted outrage when an Instacart shopper was paid a $10 tip for an order but was only paid 80 cents in base pay.

Instacart apologized to workers and vowed to change its policies. Amazon and DoorDash? Not so much. And DoorDash’s version of this policy, first rolled out in 2017, was noted as being a bit more extreme than the average.  According to reports, DoorDash’s system was designed to pay out as little as a $1 if the customer’s tip was large enough to cover the entire order. The policy at the time angered labor activists  and workers — many of whom pointed out that the concept of “tip” generally entails payment over base pay.

For a few weeks, DoorDash’s CEO maintained that workers within the organization were on the whole happy with how much they were paid, and with the startup's policies. The firm pointed to internal surveys that showed 80 percent of workers were satisfied with their pay.

However, as the chorus of complaints got louder and more intense, DoorDash grew a commitment to learning more about the unsatisfied 20 percent, and how to ameliorate those feelings. Citing “a lot of discussion in the media about our pay model,” Xu sent an email to Dashers last week, announcing a series of surveys and roundtables where they can air grievances.

The  email also notes that on average, Dashers took home $17.50 an hour in 2018.

After gathering input, said Xu, “we will report back on what we learned and what changes we plan to make in response.”

Whether those changes will ever come through — or if local regulators will give them the chance — remains to be seen. The issue has already caught the attention of at least one San Francisco lawmaker who has asked the city Office of Labor Standards Enforcement to determine whether Dashers should be re-classified as employees —covered under the city’s minimum wage law and entitled to all tips on top of base pay.

Such a classification would cost DoorDash a lot more than simply paying base pay as … well, actual base pay, and not factoring in tips on top.

But DoorDash, for the time being, is focused on moving forward at full speed. This week it rolled out a new promotion with Wendy’s to offer basketball fans a free $5 Biggie Bag. The free bag can be added to any order of $10 or more — and the delivery will be free.

The promotion will run through March 24.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.