As you probably know, DoorDash is slated to IPO at a mammoth $32 billion valuation.
While much attention has been given to the fact that they’re still unprofitable in what might be considered the best possible environment for a delivery aggregator — and by their own admission expect revenue to decline in the future — something else caught my attention while reading their more than 250 page S-1.
Not one mention is made of DashMart.
To be fair, it’s possible that DashMart isn’t subject to the disclosure requirements or viewed as a significant piece of DoorDash’s business. But I just find the omission interesting since DashMart appears to be a substantial play.
As of the time of writing, DoorDash’s website has open DashMart jobs in 36 cities — far more than the eight included in their August announcement, and the five that were slated for the “coming months.” I pulled the most recent census data for each of the cities proper. Altogether, these DashMart locations will be able to serve nearly 10% of the U.S. population with their virtual convenience stores. That’s of course a very conservative estimate.
The shift from aggregating to operating convenience stores is also itself an interesting move. According to posts on Reddit’s /r/doordash, DashMart was already being tested as far back as January — months before April’s partnership announcement with Wawa, Circle K, Casey’s and others.
Outside of the S-1, DoorDash is quite vocal about DashMart and its intentions. A job posting for a Supply Chain Specialist states that “DashMart is a new team at DoorDash focused on building a new type of convenience store.” A recent posting for a Launch Trainer describes an opportunity to be “on the ground leadership for launching new DashMart warehouse locations.”
Indeed, DashMart is listed on the DoorDash for Merchants webpage as a way to “reach more DoorDash customers with our online, on-demand convenience store.” One warehouse employee in Phoenix gave his opinion on Facebook back in August when he wrote that DashMart is “the same thing as goPuff, but cheaper and they have a larger delivery area.”
Another job posting for a Warehouse Associate refers to “DoorDash Essentials,” stating that it’s “a big bet to bring our customers everything they need at home — not just restaurant food — to their doors as fast as possible.”
Indeed, “DoorDash Essentials, LLC” is listed as the legal name on property records for a warehouse in Chicago that does business as both DashMart and The Corner Market by Caviar. A quick search on LinkedIn and Facebook reveals multiple photos posted by employees inside warehouses across the U.S. And yet, the S-1 has no mention of “warehouse” or “essentials.” Even though the Warehouse Associate job posting describes the role as “the backbone of our operations,” the Facilities section on pages 193 and 194 of the S-1 make no mention of any warehouses.
To be fair, the filing is very clear about DoorDash’s desire to expand beyond restaurants. A query for “convenience” returns two occurrences of the same sentence, stating that their ambition is to “empower all types of local businesses, from single proprietors to franchisees, convenience stores to grocers and florists to pharmacies.”
CEO Tony Xu’s letter elaborates on this. He argued that DoorDash has a “broad array of services” to help the many local businesses that have been left behind in the convenience economy. Xu described a desire to become the “merchant’s first call” and for the DoorDash subscription program, DashPass, to become the “wallet for the physical world.”
If I had to guess, the subscription service will be a major focus moving forward. More than five million individuals were on DashPass as of Sept. 30, and this enables them to avoid paying delivery fees and portions of the service charge. Growing DashPass will be key to increasing the frequency of delivery and creating a sticky customer base. Indeed, the S-1 states that they expect to increase the amount of consumer spend on the platform and broaden DashPass benefits as they continue adding new verticals beyond food.
So what does this mean for convenience retailers? For one, DoorDash partnerships appear to be a risky business. While the incentives might line up for individual retailers to partner, enough partnerships would give DoorDash access to data on the c-store industry at scale. That doesn’t seem wise as they’re currently investing in their own competing offer. If you want to see what that future looks like, just visit the AmazonBasics website.
I do have to give them credit. It’s a smart move for DashMart to enhance its offer through partnerships with popular, local merchants. This helps differentiate them from many of the convenience stores on their platform who primarily sell products from national CPG brands. And as I’ve previously written, many convenience store brands are badly in need of a differentiated product offer.
The S-1 omission may be a sign that this is an overblown concern, but I think retailers would be wise to keep an eye on it. From DashMart to goPuff’s recent acquisition of BevMo and other developments in last-mile delivery, it’s clear that the nature of convenience is changing. Now is a good time to be vigilant.