Many app categories are facing fiercer and fiercer competition in today’s consolidating marketplace. One such category is restaurant delivery apps. After the new user growth this category experienced during the pandemic, which apps are retaining users as pandemic restrictions ease? Below, we analyze the apps that are winning the restaurant delivery war when it comes to revenue and retention and why.
The COVID-19 pandemic accelerated the growth and innovation of the restaurant delivery app industry, as millions of people in lockdown ordered food using apps for the first time. And, that growth continued from year one to year two of the pandemic. As of April 2022, 52% of U.S. consumers ordered from one of the major meal delivery services.This represented a 47% increase from the year prior.
Today, the restaurant delivery app industry is expected to grow to $320 billion by 2029. In 2020, the industry saw record-breaking growth, clocking the largest expansion in revenue it's seen in the last 5 years.
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Source: Business of Apps
When it comes to top-performing markets in the food delivery space, China dominates. In 2021, the Chinese market drove $27.3 billion in revenue. The app that drove the majority of that revenue was Meituan at $15 billion. This makes Meituan the largest food delivery app in the world by revenue and usage.
Coming in second in revenue is the U.S. market at $22.4 billion. While the U.S. represents only the second-largest restaurant delivery app market globally by revenue, we’ll be focusing on this market for the purpose of our analysis based on available data.
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Source: Business of Apps
Currently, in the U.S. market, there are four major players in the food app delivery marketplace: DoorDash leads in monthly sales market share with 59%, followed by Uber Eats with 24% and GrubHub with 14%. The remainder of the total market share is accounted for by smaller, miscellaneous players such as Caviar, Amazon Restaurants and Waitr.
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Source: Bloomberg Second Measure
Representing 14% of all monthly food delivery sales is Grubhub. After merging with Seamless and going public in 2013, Grubhub once held 70% of the food delivery market. However, since the rise of super competitors like Uber Eats and DoorDash, it’s steadily lost market share. Grubhub generated $1.8 billion revenue in 2020, a 39% increase year-on-year. However, this represented a $155 million net loss. In fact, Grubhub did not report profits for 2019 or 2020. Also as of 2020, it had 31.4 million active users, who use the app at least once a month.
Uber Eats launched in 2017, quickly surpassed Grubhub in market share and acquired Postmates in 2020 to bolster its dominance. Since its launch, Uber Eats has yet to report a profit, despite the fact it takes 20-30% fees from all orders and saw gross bookings triple in the pandemic. It currently controls 24% of total food delivery market share and has over 66 million users. In 2020, it drove $4.8 billion in revenue, a 152% increase year-on-year.
Commanding close to 60% market share, DoorDash is the top food delivery app in the U.S. market. In 2021, DoorDash went public with a $72 billion valuation. Since its launch in 2013, it has never made a profit. In 2021, it reported revenue of $4.88 billion, a 69% increase year-over-year. In 2021, it also reported an annual net loss of $468 million, $7 million more than 2020.
By average sales per customer, DoorDash dominates. DoorDash customers spend tan average of $323 in a quarter; versus Uber Eats customers who spend an average of $246, and Grubhub customers who spend an average $163.
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Source: Bloomberg Second Measure
It’s clear DoorDash is the leading app in the food delivery market by revenue. How has this app dominated in the restaurant delivery app war?
In 2018, DoorDash launched its DashPass subscription option which has been a key retention strategy for its user base. By 2022, DoorDash’s DashPass subscription had attracted 30% of its customers. DashPass’ retention rate continues to outperform industry averages. From May 2021 and May 2022, 69% of DashPass subscribers remained after one month; after 6 months — 42% and after a year — a whopping 32% of users remained subscribed.
DoorDash has also expanded its subscription offerings to be personalized and relevant to key cohorts. This includes students through its DashPass for Students promotion, which offers the DashPass subscription at a reduced price. Also a partnership with Chase Bank in 2019 which gave free DashPass memberships to millions of credit card holders.
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Source: Bloomberg Second Measure
Another key strategy for DoorDash has been partnerships with large restaurant chains and brands to expand its customer base. In 2020, DoorDash officially teamed up with Little Caesars Pizza to handle their delivery operations during the pandemic, which had never previously been offered. It also partnered with major fast food chains such as Wendy’s, Chick-fil-A, and McDonald’s.
These partnerships not only expanded DoorDash’s user base but also drove profits for partner restaurant chains. In May 2022, DoorDash accounted for 8% of Buffalo Wild Wings and 11% of Chipotle’s sales revenue.
Last but not least, DoorDash has created a myriad of ways for its merchants to advertise on its platform. This includes the self-serve advertising platform it launched in 2021 as well as educational resources about using well-timed promotions and winback strategies to keep customers engaged.
These resources have helped DoorDash farm out some of the retargeting and retention work to its merchants. Restaurants that use DoorDash to fill the gap in their delivery operations are more apt to use promotions and ads to promote their restaurants, promoting DoorDash’s platform in the process.
The food delivery app marketplace continues to face fierce competition as the market consolidates.
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