DoorDash is a US-based food delivery company with a massive presence across the US and Canada. Besides, the company is also expanding successfully in Australia and Japan along with a few countries in Europe as well. DoorDash has been able to increase sales by 69% from 2020 to 2021 but the company is still going into heavy losses and in 2021, its losses widened to $468 million from $59 million in 2018.
The PESTLE analysis is an effective tool for analyzing the external environment with respect to the industry. It reveals the political, economic, social, technological, environmental, and legal aspects prevalent in the countries. This article would contain an in-depth analysis of the prevailing political, economic, social, technological, environmental, and legal environment for the food delivery companies in the US as well as Japan.
Table of Contents
A holistic and impressive PESTLE Analysis
Political factors affecting DoorDash
The US has a stable political environment with a thriving environment for trade and commerce. The country also has free trade agreements and flourishing trade relations across the globe barring a few nations that primarily include China and Russia. Various laws are being formulated in the US for the food delivery companies, for instance, the state of New York has formulated new law wherein the companies are required to pay the delivery drivers the ongoing minimum wages from FY2023 as compared to per delivery system till now. This would lead to an increase in the operational expenses for the companies. Further, the companies can face inconvenience while delivering in a few areas as the drivers have been entitled to ignore the trips that involve passing through tunnels and bridges (Subin, 2021). Further, the city of New York has capped the fees that the delivery companies can charge from the restaurants to a maximum of 15%. This can lead to a decrease in the revenues of the companies as compared to earlier (Brooks, 2021).
Besides, Australia is another budding market for delivery services and the state of New South Wales has announced various safety measures to enhance the safety of delivery drivers. The companies are mandatorily required to provide personal protective equipment and induction training to the drivers (Azul, 2021). This can result in more operational expenses for the companies.
Economic factors affecting DoorDash
The growth rate of the US is witnessing a downfall and is forecasted to decline to 4% in 2022 and 2.6% in 2023 compared to 5.7% in 2021 (IMF, 2021). This can impact the companies as well as the purchasing power of the consumers in the industry. Further, employment is also witnessing positive growth and unemployment is predicted to lower to 5.7% in 2022 from 6.3% in 2021 (UN, 2021). The lowering of the unemployment rate means more people would shift to full-time work to earn their income and there can be a dip in the number of people working as gig employees. Hence, the delivery companies would face difficulty in sourcing drivers and might have to increase the commission of drivers to lure them for work. Also, inflation is at an all-time high of 7.5% due to a lack of supply of commodities as a result of COVID. The high inflation would lead to an increase in the prices of various important inputs such as fuel for vehicles and other components. This means that the companies would have to pay more to drivers and as a result, they would charge more from the customers which can lower the demand for the delivery platforms.
Speaking of the industry growth rate in the online food delivery industry, in the US, the industry is expected to enjoy a booming growth at a CAGR of 10.5 percent by 2026. By 2026, the industry is anticipated to reach a value worth 33.7 billion and these are positive signs for the industry.
Further, Australia’s growth rate in Q42021 has yielded positive results with a growth rate of 3.4%, highlighting the increase in business opportunities. But, the companies would need to increase their budget as the wages have also risen by 2.3% (Mehra, 2022). This can lead to more expenditure for the companies which ultimately would impact the overall financials. Moreover, Australia has an excellent credit rating of AAA, signifying that country has no political risk and high creditworthiness, hence, the companies can expand their business in the country.
Further, the Australian food delivery segment is witnessing a rise in sales with the market growing at a CAGR of 20.6%. Also, many new companies have entered the market which highlights the potential in the market.
Social factors affecting DoorDash
The trend of ordering food from delivery services is high in the US with 31% of people preferring to order food from delivery services at least twice a week. Further, the companies can benefit financially as 20% of customers spend more on online ordering of food than dine-in (Resendes, 2020).
Besides in Australia, the penetration of smartphones is high and more than 20 million people use smartphones. Moreover, the evolving technology by the introduction of 5G can lead to more efficient internet services. This can lead to an increase in the number of people ordering online. Moreover, the youngsters are considered to be more tech-savvy and in Australia, people within the age group of 16-24 order from online sources the most. Furthermore, people are becoming more conscious about the environment and companies would need to shift to a sustainable fleet to sustain themselves in the long run.
Technological factors affecting DoorDash
The expenditure of the US government on research and development in 2021 amounted to $157 billion and the government has increased the budgetary allocation to $171 billion for 2022. Further, the Australian government also spends extensively on R&D and it incurred $35.6 billion in 2021. Various new technologies have emerged in the food delivery sector including delivering food by robots. This can be of great help in the metro cities as it can help the companies avoid traffic congestion and as a result, deliver at a much faster pace. Further, the companies are using chatbots to interact with the customers and reply to their queries in a time-bound manner, thereby helping the companies enhance their customer relationships. In addition, e-bikes for delivery are a growing trend. It can be of great help to companies as it consumes no fuel, thus reducing the carbon footprint of the companies and e-bikes do not require any extra parking space (Khatri, 2020). As most of the operations of the delivery companies are tech-enabled, the use of various cybersecurity tools can be useful for protecting the data In addition, many companies are using big data analytics to track the customers' purchasing behavior which helps the companies to offer customized deals and hence increase the sales.
Legal factors affecting DoorDash
The acts that govern the food delivery industry in the US include the Fair Food Delivery Act which is applicable in the state of California. The law prohibits food delivery companies from altering the prices of food. The law makes it unlawful for the companies to change the price after the customer has placed the order either by imposing more delivery charges or any other charge without the consent of restaurants. Moreover, the restaurants cannot retain any portion of the tip paid by customers and the companies are also required to disclose every detail of the order by breaking down the cost of each transaction (Cohen & Jessup, 2021). This would ensure that the companies do not engage in unfair dealings. Further, the Seattle city council has passed a bill wherein the companies are required to gain approval from the city government before adding any restaurant to the platform. Further, this bill provides the restaurants with the right to get out of contracts anytime they wish to do so (Gaurente, 2021). This would limit the authority of the food delivery companies to deal with the restaurants.
Besides, The food delivery companies are also required to abide by certain regulations in Australia. These include Australian Consumer Law wherein the food delivery companies cannot post misleading images of the food items to attract customers. The food delivery companies are also regulated by the Australian Competition and Consumer Act which states that companies cannot charge unfair prices to the customers and the companies are forbidden from indulging in price-fixing, bid-rigging, etc. This law impacts the companies as they won’t be able to influence prices or create monopolies to enhance their dominance. Furthermore, the GST laws have been changed and the onus of collecting GST is now on the food delivery platforms. Doing so would impact the ultimate price of the order, hence many customers can shy away from ordering through delivery platforms, leading to losses for the companies.
Environment factors affecting DoorDash
The food delivery sector contributes highly to carbon emissions through the use of gasoline vehicles for delivery and single-use packaging for packing orders. The use of delivery vehicles creates air pollution while the plastic goes into landfills and water bodies ultimately leading to the release of harmful gasses and the destruction of marine life. To overcome this problem, the government of the US has initiated a target to ban gasoline vehicles by 2035. This would have an impact on the food delivery industry as they would have to convert their entire fleet of vehicles into electric vehicles which would increase the cost.
Further, in Australia, there has been an increase in carbon emissions by 20% in the last 2 years, primarily due to a surge in food delivery orders. Also, Australia is part of the International Paris Agreement wherein it has set a target of reducing 50% emissions by 2030, and going by this, the federal government is promoting the use of sustainable vehicles. This can impact the food delivery companies that have a fleet of gasoline vehicles as they would require an overhaul of vehicles, in addition, the South Australian government has announced a ban on single-use plastic for which the restaurants and food delivery companies would have to find other alternatives. This would also result in increased expenditure.
To conclude, few state governments in the US have entitled the drivers to ignore the orders on risky terrains which can be a barrier for the companies in fulfilling the deliveries. Further, the credit rating agencies totally are in favor of the companies doing business in Australia as they have rated the creditworthiness of the country extremely high at AAA. The thing that can turn out to be beneficial for the companies is that there has been an increase in the customers ordering food from the delivery platforms and further through the use of various emerging technologies they can enhance the efficiency of their business. Moreover, if you wish to analyze the internal capabilities of the company, you can delve into an astute SWOT analysis of DoorDash conducted by us with extensive research.
BROOKS, K. (2021). Food delivery services are suing NYC for capping their fees. //www.cbsnews.com. Retrieved 1 April 2022, from https://www.cbsnews.com/news/uber-eats-lawsuit-new-york-city-grubhub-doordash-15-percent-cap-manhattan/
Khatri, M. (2021). Rise of electric vehicles in delivery businesses. www.yelowsoft.com. Retrieved 1 April 2022, from https://www.yelowsoft.com/blog/rise-of-electric-vehicles-in-delivery-businesses/.
MEHRA, P. (2022). Australia GDP up 3.4% in Q4 as election looms for Morrison. asia.nikkei.com. Retrieved 1 April 2022, from https://asia.nikkei.com/Economy/Australia-GDP-up-3.4-in-Q4-as-election-looms-for-Morrison
Resendes, S. (2020). 26 Online Ordering Statistics Every Restaurateur Should Know in 2021. upserve.com/. Retrieved 1 April 2022, from https://upserve.com/restaurant-insider/online-ordering-statistics/.
Rushe, D. (2022). US inflation hits highest level in 40 years in January as prices rise 7.5% from 2021. www.theguardian.com/. Retrieved 1 April 2022, from https://www.theguardian.com/business/2022/feb/10/us-inflation-reached-highest-level-40-years-january.
Subin, S. (2021). New York City passes bills offering protections to food delivery workers. www.cnbc.com/. Retrieved 1 April 2022, from https://www.cnbc.com/2021/09/23/new-york-city-passes-protections-for-food-delivery-workers.html.