Delivery Apps Bet on Next-Hour Commerce

DoorDash and Uber Seek Growth Avenues

DoorDash (DASH) and Uber (UBER) are making a bet on next-hour commerce as they look for ways to hold on to customers gained during the pandemic. Next-hour commerce means delivering products to consumers’ doorsteps in an hour or less.

Amazon (AMZN) pioneered next-day delivery. Now other companies are working to get in on the action. DoorDash and Uber will soon deliver a range of products from drugstores, liquor stores, and other businesses within an hour.

Non-Restaurant Orders to Boost Margins

Demand for Uber and DoorDash’s food delivery services surged during the pandemic. Analysts expect that consumers will stick to some of their online ordering habits even as the pandemic subsides. Uber and DoorDash hope to take advantage of this trend by continuing to offer food delivery and by starting to deliver a wider range of products.

Despite their rapid growth, both DoorDash and Uber have yet to achieve profitability. Groceries and alcohol deliveries tend to make delivery companies more money and offer better margins than orders from restaurants. The delivery companies can bundle groceries and other items with hot food, thereby lowering delivery costs.

Delivery Companies Partner With Retailers

Both DoorDash and Uber are seeing increased demand for non-restaurant deliveries. Last month, DoorDash increased its full-year estimate for the total volume of orders placed on its platform to $38 billion, up from $33 billion.

Meanwhile Uber said from the fourth quarter of 2020 to the first quarter of 2021, non-restaurant orders increased 70%. Among the retailers working with DoorDash are Macy’s (M), Petco (WOOF), and Walgreens (WBA). UberEats is teaming up with Gopuff, a delivery app which runs more than 400 warehouses, to keep DoorDash at bay. The past year and a half has been a roller-coaster ride for delivery companies. Now, they are working to respond to new market conditions with next-hour delivery offerings.

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