Fees have long plagued meal delivery service users, and lowering or eliminating these costs has become a sticking point for players like Postmates and Seamless as they compete to gain and keep customers. As competition heats up, though, others like DoorDash are turning to subscription models and offering zero-dollar delivery options.
In order for delivery services to leverage subscriptions to keep their services competitive, they must offer models that benefit customers as well as restaurants and merchants, according to Jack Ruth, head of subscription for DoorDash’s subscription service, DashPass.
DoorDash’s main challenge has been building a loyal consumer base that regularly taps into its service, especially as it sought to enter a market that already featured established providers. To gain a robust user base and drive immediate daily usage, Ruth said DoorDash has married zero-dollar delivery, a vast selection of participating restaurants and low monthly prices.
“With DashPass, they know that every time they open the DoorDash app, they’re going to get a zero-dollar delivery,” Ruth said. “So, that combination of making a thing more affordable and more predictable was the best way we found to make this a daily habit.”
The service, which is available via mobile app for $9.99 per month, offers zero-dollar delivery from a broad selection of restaurants, and also comes with other perks. Ruth said DashPass users save an average of $4 every time they place an order through the service.
The Math Behind DoorDash’s Subscription Service
Building an economically viable subscription service presented a number of hurdles, however, and Ruth said it was tricky to make DashPass sustainable yet profitable.
“We spent about eight months testing DashPass to make sure this was a sustainable model,” he noted. “We wanted to make sure the economics did work, that we were profitable on every single delivery. What really makes the model work is that users are ordering so much more after they subscribe.”
DashPass users tend to order more items from a larger variety of restaurants rather than sticking to their favorites, Ruth explained. This further adds to the service’s profitability by driving customer retention and making the subscription partnership more profitable for restaurants.
Working with more restaurants also helps give DashPass an edge over similar programs in the delivery space, which are eager to capitalize on zero-dollar delivery options of their own. Rival firm Postmates, for example, is testing its Postmates Unlimited subscription program, which offers zero-dollar delivery on orders over $15.
DoorDash currently works with more than 310,000 stores across all 50 U.S. states. On the other hand, Postmates’ website claims it works with 350,000 restaurants, but is only available in select states. Ruth said this focus on availability has directly affected DashPass’ growth, with approximately 30,000 new users joining every week.
Subscriptions’ Future as Online Food Delivery Expands
Ruth said DoorDash plans to bring DashPass to all 50 states over the remainder of 2019, and its ultimate goal is to provide the service across all of its current markets. He said it’s also likely that subscriptions will become only more crucial to the company’s success as food delivery competition heats up.
“For a while, it was a question of if restaurants would offer takeout through third-party providers,” he explained. “Now it’s just a question of when.”
As more and more meal delivery platforms consider ditching their fees, subscriptions could be just the ticket to helping them expand their services and cater to more customers.