DoorDash Explores Dark Store Services For Grocers

Dive brief:

  • DoorDash is looking for ways to use its DashMart convenience store service as a platform for grocers, Fuad Hannon, head of the company’s new verticals, said in an interview.
  • Hannon said DoorDash is in the “early days” of exploring a few models, including as examples, urban delivery from dark stores on behalf of grocers and dedicated delivery for private label retailers.
  • Although Hannon pointed out that DoorDash did not confirm its plans here, his comments indicate that the company is considering following Instacart by offering dark stores as a service to grocers.

Dive overview:

As DoorDash catches up with e-commerce leader Instacart and competes for customers’ money in the grocery store, it is focusing on new services it can offer to retailers who use its existing assets and technology, Hannon said.

One of them is DoubleDash, the tool he launched with Albertsons earlier this week that allows shoppers to stack an order from one of its many restaurant partners on a grocery delivery.

Another appears to be the dark store model it currently operates under its DashMart online convenience brand, which launched last summer and now has around 25 locations. The launch of this service, which goes through the dark stores owned by DoorDash using its own assortment, signaled a new approach among e-commerce tech companies who preferred to operate as service providers and marketplaces, and remain free of material, products and other assets.

It has also raised concerns that the company could compete with partner retailers in its market – fears that may still be justified depending on how the company chooses to develop its own restaurant services. Hannon declined to say whether the company plans to expand a similar grocery offering to DashMart.

But Hannon said DoorDash envisions DashMart as a platform it could eventually open up to retailers. He compared the approach to his first grocery logistics strategy. Whereas a few years ago DoorDash only delivered groceries placed on its market, it now offers delivery as a service to grocers like Hy-Vee and Walmart.

“We envision doing a very similar thing on the DashMart front where, from our perspective, it’s four walls and a box that we can tap into to generate as much added value as possible for our merchant partners and customers,” said Hanno.

Authorization granted by DoorDash

He cited two models of dark store service that DoorDash could implement: a private label marketplace and an urban delivery service.

“Imagine a grocer who might only operate in suburban areas of a given market, and they have no presence in the downtown urban core,” Hannon said. “We are working with them to identify key pockets of the market where we could partner up. To deliver a dark store model that carries the brand alongside the grocery store to customers in this region.”

Hannon said grocers want to offer faster delivery in line with the new 30-minute service Kroger just launched with Instacart. He cited the demand for faster delivery times to meet needs such as last-minute dinner preparation was a key finding for DoorDash during the pandemic. This is also the opportunity run by Gopuff as well as many super-fast delivery companies like Gorillas and 1520.

“The ability to have something delivered in 30 or 45 minutes so that you can have dinner ready in an hour – that’s a really compelling consumer value proposition,” he said. “Should it be 45 minutes versus 30 minutes or 15 minutes?” I don’t think anyone in the industry has a crystal ball.

He also noted that DoorDash is seeing tremendous demand for late-night convenience offerings, which tend to provide faster service.

“There is significant late-night demand for the 30-minute and less delivery to unlock,” he noted. “You’re not going to wait an hour at 11:00 pm, but you could wait 25 minutes for delivery. “

DoorDash’s exploration of dark store services unfolds as Instacart moves decisively in the same direction alongside automated micro-execution company Fabric. This news underscored the urgency for grocers and for Instacart to move execution beyond store aisles and backrooms to accommodate higher volumes and increase efficiency. Hannon’s comments also indicate the potential for new stand-alone e-commerce services for grocers.

At the same time, the rise of dark stores continues to fuel the industry debate over whether e-commerce tech companies like Instacart and DoorDash will use these facilities to power their own grocery stores. . Instacart, for its part, denied any plans to do so.

Whatever his future plans, DoorDash, which has built its business on restaurant orders, has been rushing into the grocery store for more than a year in a game-changing pandemic. Hannon said grocers are looking to the company for new services and innovations, and to tap into its user base, which includes 20 million monthly consumers.