This analysis looks at whether DoorDash's business is actually profitable. The guest argues it only makes about 3% per order on average and sees little room for improvement due to rising labor costs and stricter regulations. Key mentions: DoorDash itself (thin margins, average order only $31), Uber Eats (more aggressive batching but worse experience), and Instacart (higher average order of $90, whose ad model DoorDash is trying to copy).
DoorDash was founded in 2013 by four Stanford students and has since grown into one of the world's largest local delivery platforms, covering 27 countries with an annualized total gross merchandise value (GMV) exceeding $50 billion. In this episode of Business Breakdowns, investor Zack Fuss and anal
Guest: Matt Newberg (Founder of HNGRY), moderated by Zack Fuss (Irenic Capital). Main Theme: DoorDash is transitioning from a pure third-party delivery platform to a vertically integrated local commerce infrastructure, but faces structural profitability challenges. Core Assessment: Matt Newberg believes that DoorDash's current blended margin across all orders is only about 3%, and with rising labor costs and tightening regulations, this figure is unlikely to improve significantly — "I don't see how this becomes a much better business than it is today."
Matt Newberg points out that DoorDash experienced explosive growth during the pandemic, but its growth rate has since notably decelerated.
Key Insight: The growth rate has declined from 70% to 26%, indicating that the structural demand boost from the pandemic is fading. DoorDash counters skepticism about its slowing growth with a grand narrative of "digitizing local commerce."
Matt Newberg deconstructs the profitability structure of DoorDash orders, highlighting a vast gap between the average order and the ideal order.
| Dimension | $100 Order (Ideal Scenario) | $31 Order (Average Scenario) |
|---|---|---|
| Restaurant Commission (25%) | $25 | Approximately $7.75 |
| Rider Cost (2 orders/hour) | Approximately $10 | Approximately $10 |
| Tip Coverage | 20% tip fully covers delivery cost | Tip insufficient to cover |
| DoorDash Retained | Approximately $15 | Approximately $1 or less |
Core Contradiction: The average order value is only $31, while delivery costs are relatively fixed. This means the vast majority of orders generate razor-thin profits. "If the order value is only $31, DoorDash is lucky to make $1."
On Overall Profit Margins: Newberg cites an investor's analysis—grocery orders lose approximately 10%, restaurant orders profit approximately 5%, and the blended margin is approximately 3.1%. This does not include corporate-level management expenses and overhead.
The author uses this data to justify his position, but readers should note this is a position-holder's perspective—Newberg is generally cautious on DoorDash, while Zack Fuss, as an investor at Irenic Capital, may hold a more bullish stance.
Matt Newberg argues that DoorDash’s primary levers for improving unit economics are “batching” and “white-label logistics,” but both face inherent ceilings.
Key Insight: White-label logistics is DoorDash’s core differentiator in competing with Uber Eats—it positions DoorDash as “delivery infrastructure” rather than merely a “food delivery platform.” However, Newberg points out that this is fundamentally a “time and space” business, and physical constraints cannot be fully eliminated by software.
Matt Newberg argues that DoorDash is transitioning from a pure third-party platform to a "first-party" model, but most experiments have already failed or been significantly scaled back.
Key Insight: Newberg believes these experiments show that DoorDash recognizes the profit margins of the pure third-party model are unsustainable, but vertical integration exceeds its core capabilities — "most tech companies (except Amazon) scale through asset-light models, and this is a completely different model."
Matt Newberg distinguishes between DoorDash's two new initiatives on the supply side: virtual brands (low value) and advertising (high potential).
The author uses this to justify his position, and readers should note this is a holder's perspective—Newberg is optimistic about the advertising business but acknowledges "they are tight-lipped about it, and specific transaction details are opaque."
Matt Newberg believes that regulation is the biggest structural risk facing DoorDash, potentially undermining its unit economics fundamentally.
Key Judgment: "If New York succeeds, other big cities will follow. When food costs rise, labor costs rise, and global regulation tightens, the math simply doesn't add up."
| Position | Analyst Stance | Key Data |
|---|---|---|
| DoorDash | Risk Warning | Comprehensive profit margin approximately 3%; restaurant order profitability around 5%, grocery losses about 10%; average order value $31 |
| Uber Eats | Neutral (as a comparison) | More aggressive in scaling, but at the expense of user experience |
| Instacart | Neutral (as a comparison) | Average order value approximately $90; advertising model serves as a reference for DoorDash |
| GoPuff / Gorillas / Gopuff | Risk Warning (as DashMart competitors) | Many players have exited the market |
| Cloud Kitchens | Neutral (as a comparison) | The largest ghost kitchen operator globally |
| Mr. Beast Burger | Risk Warning | Represents a virtual brand; restaurants retain approximately 55% of revenue |
| Milk Bar | Neutral | DoorDash is partnering with it to deliver cakes using existing restaurant refrigerator space |
| Sweetgreen | Neutral (as a white-label logistics case) | Uses DoorDash's white-label logistics but retains customer data |
1. Matt Newberg: DoorDash's overall profit margin is approximately 3%, comparable to "traditional legacy grocery stores" — Grocery orders lose about 10%, while restaurant orders profit about 5%, with the two offsetting each other to leave only 3.1%.
2. Matt Newberg: Batching has a natural ceiling — "2 orders per hour" may already be the practical limit, as drivers must drive to different merchants to pick up and then deliver orders, a physical constraint that software cannot eliminate.
3. Matt Newberg: White-label logistics is DoorDash's core differentiator, but it is essentially a "business of time and space" — By allowing merchants to accept orders on their own websites and using DoorDash for delivery, it creates more order density, but cannot break through physical limitations.
4. Matt Newberg: DashMart is the most successful experiment in vertical integration — It uses sales data from third-party convenience stores to determine product selection, ranks among the Top 10 merchants in all operating cities, and achieves eight-figure annual sales in large cities.
5. Matt Newberg: Ghost kitchens and automation (Chowbotics) have largely failed — DoorDash is no longer signing new ghost kitchen leases, and Chowbotics has been shut down; consumers do not want "food that comes from a building without a kitchen."
6. Matt Newberg: Advertising is DoorDash's true future, benchmarking against the Instacart model — U.S. CPG companies spend approximately $250 billion annually on shelf fees and trade spending in traditional retail, a market where DoorDash and Instacart will compete head-on.
7. Matt Newberg: New York's 2024 minimum wage of $22/hour for delivery drivers could fundamentally undermine unit economics — It is estimated that the delivery cost per order will reach $12, requiring consumers to pay an additional delivery fee of about $7, which is unsustainable for an average order of $31.
8. Matt Newberg: Restaurants should avoid directing their own customers to third-party platforms — "If you promote your restaurant on Instagram and the link goes to DoorDash, you are paying a permanent 25% commission for customers you already acquired."