A multibillion-dollar US food delivery service is set to disrupt New Zealand hospitality with a launch understood to be planned for next month.
DoorDash, which listed on the NYSE in late 2020 and recorded a loss of US$468 million from revenue of US$4.89 billion last year, is set to establish a New Zealand offering, going head-to-head with other established food delivery services such as Uber Eats.
The company would not confirm details of the launch or its planned business model, but NBR understands it hopes to pitch itself as being significantly cheaper for local hospitality operators than rivals, some of which are said to charge up to 30% of each order.
DoorDash is advertising for multiple New Zealand workers on LinkedIn: “DoorDash is looking for top talent to play a pivotal role in building our business in New Zealand! Every corner of New Zealand has a local favourite; this role will help us win at the hyperlocal level.”
And, last November, it registered a company called DoorDash Technologies New Zealand with the Companies Office, listing its ultimate holding company as DoorDash, Inc.
The entity has one New Zealand director who works as a management consultant, and two American directors: DoorDash vice-president of tax Jonathan Grahmann and chief accounting officer Gordon Lee.
DoorDash already has an Australian presence, having launched there in 2019. It claims to operate across 85% of Australia with more than 40,000 local drivers called ‘Dashers’. This month, DoorDash launched a partnership with Afterpay in Australia, allowing customers to pay for both orders and subscriptions over split instalments.
NBR has also spoken to local businesses that have signed up with DoorDash ahead of the New Zealand launch.
A better deal
Arsel Aslam is the marketing manager of Mama Brown, a Tex-Mex-styled restaurant in Wellington and part of the DoorDash launch in New Zealand. Aslam said the company approached him last month offering significantly lower fees than Uber Eats, the service the restaurant is currently with.
According to Aslam, DoorDash planned to launch in New Zealand from Australia on April 13 but said Covid-19 had made it hard for them to get people to New Zealand. DoorDash would not confirm a date.
DoorDash is believed to be charging restaurants between 10% and 25% of each order.
Last year in the US, DoorDash introduced a tiered system, with charges ranging from 15% to 30%, that restaurants could choose between with increasing benefits with percentage, depending on the goals of the restaurant.
Aslam said he believed Uber found out about the launch and offered a 2-2.5% decrease in exchange for an exclusive deal with the restaurant.
“That’s more like a slap in the face. It wasn’t even worth talking to them on the phone,” Aslam said.
No comment on concept
Uber did not directly comment on the concept of discounts for exclusive deals but a spokesperson for UberEats said: “We give restaurants across Aotearoa choice and control in how they partner with Uber Eats to grow their business and reach new customers beyond their physical footprint. Some partners have already seen the benefit of offering their product exclusively on Uber Eats because of the everyday appeal of our platform through rewarding programs like Uber Pass.”
Uber Eats' highest charge to restaurants is 30% but can be as low as 6%, where a customer picks up an order themselves.
According to Aslam, DoorDash planned to be cheaper, not only for the hospitality sector, but also for the customers making purchases. It was hoped this would lead to people buying more because they were spending less upfront.
“If you’re spending $6 less per delivery, that’s another coffee, that’s another Danish, that’s another muffin,” Aslam said.
Mama Brown says 20% of its orders are now conducted online but Aslam said this is only growing. As well as delivery, the company also offered a pickup option for customers. Mama Brown had tried to entice people to choose this option with deals and discounts so the restaurant could avoid paying the Uber fee but 90% of the total online orders remained delivery.
“If people could get it delivered to their beds, they would,” the marketing manager said.
Food focused
Aslam characterised DoorDash as “disrupting the disruptor”, meaning it was bringing an improved approach to an already disrupted food delivery model.
He said he liked that the food delivery service was focused on food, rather than moving people and food.
He said Uber’s challenge was that drivers were hopping between food and passenger deliveries which could lead to delays, and Aslam was aware of food not being collected, and calls to the restaurant asking where their orders were or why it arrived cold. He felt it was an issue the company either hadn’t picked up on or didn’t know how to fix.
“You want that food to go out and get to the customer as hot and presentable as possible, and I think some of the operators in the industry are hoping this might be the trick,” Aslam said.
The claim that drivers are able to jump between delivering food and picking up passengers is disputed.
Platform tutorials conducted by Mama Brown revealed that that tech platform appeared to be easier to use for both staff and customers. Technology was one of the things that first drew Aslam towards Uber. He said he found UberEats to have one of the better platforms and felt it was something many delivery services don’t have sorted yet.
Aslam wasn’t concerned about changing from the transport giant to the new player and compared different food delivery services to the streaming services, where people could jump between different platforms depending on the content and who’s with who.
Delivery
Covid-19 has made delivery and online services more important than ever for hospitality and accelerated consumer uptake. Despite the fees, Aslam still believed it was cheaper and easier for restaurants to use services rather than hire delivery staff.
Mama Brown used to do its own delivery but, with issues such as increased insurance, fuel costs, and minimum wage increases, decided it was not financially worth it.
“Just the hassle of dealing with staffing, dealing with cars, dealing with parking tickets: one parking ticket wipes it all out,” he said.
Competition
Uber won’t be the only competition DoorDash faces in the New Zealand, however, with many other food delivery services established in the market.
A NZIER report found that restaurants which had partnered with Uber Eats had an average increase in revenue of more than $55,000 in 2019. The Uber Eats spokesperson said: “As we continue to introduce new product features across the country, we believe the Uber platform will continue to be the number one pick for New Zealanders to go anywhere and get anything.”
A spokesperson for another competitor, Australian company Menulog, said the company had seen strong growth, including convenience and grocery item orders increasing by 420% since April last year. The spokesperson said this will continue to be a focus in 2022, with demand for the company remaining strong even as restrictions begin to end.
New Zealand service Delivereasy also experienced increased demand and felt the pandemic fast-tracked growth, making it easier to expand. The company wasn’t concerned about a new player in the market and plans on letting the company’s local approach and service quality be the unique selling point.
“Any new entrant into the New Zealand market now would technically be the third large international player to come here, so we don’t expect a new entrant to change the needle considerably,” Delivereasy director Nick Foster said.
