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Big ban on campus
Breaking down DoorDash's college pull-back with Expedite's Kristen Hawley
Editor’s note: The
Kristen and I swapped stories looking at the current booze-delivery landscape from different angles. You can read my angle, on the regulatory and incumbency hurdles third-party delivery platforms face as they push into alcohol right here. If you don’t like my take, feel free to complain (to her.)—Dave.
There are some limits to DoorDash’s crusade to become everyone’s hometown delivery app. Earlier this month, the company announced what looks to be a pilot program in Massachusetts, banning alcohol delivery in certain so-called “high-risk” areas. Namely, college campuses.
“Simply put — if you are on a college campus, you will not be able to order alcohol for delivery on the DoorDash Marketplace platform,” reads a company blog post.
It’s a rare step back from a company that’s worked hard to expand its offerings beyond restaurant delivery. That’s because competition has never been more intense. Delivering wine, beer, spirits, and any other of-the-moment adult beverage unlocks more potential buyers for the delivery platforms that are still working to eke out consistent quarterly profits.
Since their inception over a decade ago, the newest big delivery companies have chased growth in orders, audience, and geography. As they’ve grown, they’ve rapidly developed robust technology and logistics networks, mobilizing a fleet of contracted couriers to ferry food and other products to most addresses in America. It would be nearly impossible for another logistics provider to step in and disrupt the networks that Uber and DoorDash have built.
In 2021, Uber spent $1.1 billion to acquire Drizly, an alcohol delivery platform. It later incorporated booze delivery into the UberEats app, but has allowed the Drizly brand to live on its own, too.
Uber CEO Dara Khosrowshahi explained why the business was such a worthy investment: At the time, Drizly had grown its gross bookings — that’s the total dollar value of orders, including taxes and fees, on the platform — 300 percent year-over-year, Khosrowshahi explained. “By bringing Drizly into the Uber family, we can accelerate that trajectory by exposing Drizly to the Uber audience and expanding its geographic presence into our global footprint in the years ahead,” he said in a release tied to the acquisition.
Khosrowshahi spelled it out: It’s worth paying over a billion dollars for more orders, a bigger audience, and more geographical coverage.
Lately, though, the large third-party firms have had less expansion success. They’ve all but conquered restaurants — DoorDash’s U.S. restaurant delivery business is profitable, even though the company as a whole is not. Now they’re hoping to take their brand of disruption and logistics to other verticals, like groceries.
Turns out, that’s hard, too. During a tech conference in San Francisco a few weeks ago, DoorDash CEO Tony Xu said that the online grocery delivery business has a “long way to go.” Delivery services need to provide consumers with “prices they expect to pay, in a manner and time more convenient than if they did it on their own,” he said.
Food delivery companies have a near-limitless total addressable market. In other words: everyone eats, and, therefore, everyone could be converted into a customer. In the case of fast-expanding tech platforms, everyone can be converted to a customer in multiple verticals, booze included.
Of course, alcohol delivery comes with its own set of unique requirements. For example, DoorDash customers have to upload a copy of their ID to place an order and present it again for the driver to scan at the point of delivery.
Still, a delivery driver arguably carries the lion’s share of responsibility. It’s on the courier to make sure they’re legally delivering the order, which induces checking and scanning identification, matching the ID to the person collecting the alcohol, and also ensuring they’re not visibly drunk. Violating these rules could lead to civil or even criminal penalties. A DoorDash courier help page even reminds drivers, “This is serious business.”
(Neither DoorDash nor Uber drivers are required to deliver orders containing alcohol and are alerted before accepting an order.)
DoorDash didn’t elaborate on its reasoning for the campus alcohol ban, but it’s not too difficult to parse: the majority of students living on college campuses are underage underclassmen. The decision is (obviously) morally sound, but places limits on the companies’ growth and expansion.
According to DoorDash’s own research, 1 in 10 consumers in the U.S. ordered alcohol delivery in a six-month period earlier this year. Of those, over half reported using the service more than they did in the previous year.
Translated into a business opportunity, that means the company can look to the other 9 of 10 consumers for alcohol orders. It can also convince everyone to order with more frequency.
Icing out some college students won’t limit a market that clearly has tremendous growth potential. New restrictions offered in the name of safety (and, let’s be real, good press), will only make big delivery’s growth more sound.
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📬 Good post alert
Hello, it’s me Dave again, here’s a good-ass post:
📲 Big Tech, meet Big Alcohol
Because one story about the pitfalls of third-party booze delivery simply isn’t enough, I urge you to check out my piece over at Expedite, which focuses on the regulatory and political hurdles that firms like DoorDash and Drizly will have to overcome to have staying power in such a complex and constrained market such as beverage alcohol. Here’s a taste:
The basic challenge of the United States’ beverage-alcohol industry is: people want to drink, and you want to sell them drinks, but you have to do it in highly specific ways that vary depending on where you’re doing the selling. 50 different states, 50 different regulatory thickets that must be carefully navigated—or brazenly bushwhacked, depending on your lobbying budget and/or appetite for line-stepping.
Such is the nature of the post-Prohibition “three-tier system” that dictates the terms of engagement in the American booze business. “Suppliers” make the drinks, “wholesalers” move the drinks, and “retailers” sell the drinks. A free market, this ain’t, and that’s by design.
That’s right, like the wonky sicko that I am, I spent more of my one wild and precious life thinking about the middle tier. Read my full story here.
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