DASH is a long in the Hedgeye Restaurant Position monitor.
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Key points to be discussed on the call:
DASHER INSIGHTS
We heard from Naman Daga, an analyst on the Hedgeye Consumables team, who has completed over 1000 food deliveries for supplemental income after graduating college. He worked in the Northern Virginia and Columbus areas doing both Postmates and DoorDash deliveries. As an active driver, he will provide unique insights into the experiences of a DoorDash driver and compare the differences in the DoorDash driver model versus competitors. He will highlight the most significant struggles DoorDash will face with their driver supply and walk through the thought process of a Dasher when they receive an order.
GROWING GMV
Unless you are part of the growing intermittent fasting crowd, we eat three meals a day. More, importantly we do more than that in a day, like drink, snack, and have many other basic needs. We drink coffee in the morning and alcohol at night while managing a household with children and pets too! In 1Q21, DASH saw strong growth in the number of consumers who place their first order on DoorDash in new categories, but restaurants are the more significant driver of orders. Importantly, consumers who place their first order in a new category demonstrate higher average 3-month order rates than those who place their first order with a restaurant. It confirms that offering increased selection across multiple categories improves the consumer value proposition and makes DASH an essential brand for on-demand local commerce. This long-term shift will be driving higher GMV over time, and it will be a critical driver of stock price performance.
DASHPASS AS A DIGITAL FLYWHEEL
In 1Q21, less than 10% of monthly active users placed an order in a new category. We believe that DashPass will be a critical driver for more consumers to find value in ordering beyond restaurants, suggesting increased awareness, including driving increased categories/offerings and drive incremental order volume from a large and growing consumer base. DashPass is a $10 subscription (for orders more than $12) service that subverts the cost of multiple delivery fees on multiple orders. The value proposition of DashPass has translated into a membership base that has grown by 2x since its introduction. As of May 2021, there were over 5 million subscribers, but this was the same number in the S1. You can equate this loyalty to AMZN Prime or even SBUX rewards, which drive significant repeat orders. The strategy will be to add vertices into DashPass to improve the value perception to drive more GMV.
ADVERTISING IS THE FUTURE
The company will announce an advertising model by the end of 2021. A critical element to the future of DASH revenues and profitability will be to have an advertising strategy. The accelerated adoption of digital retail in 2020 has put the advertising market in flux, with the most prominent digital advertising firms are seeing record business in 2021. This shift has upended traditional patterns of brand discovery, transaction, loyalty, and competition. This poses an existential challenge for traditional brands that have historically gone to market through brick-and-mortar retailers; they are feverishly working on upgrading their digital strategy, capabilities, and capacity. At the same time, so much product discovery has migrated from Google and Facebook to the extensive digital retailers. Notably, the largest restaurant companies are scrambling to figure out marketplace selling and retail media. Many of these companies are unprepared for a future where the product ranking algorithms of Amazon, Instacart, Walmart, and Target are the primary gateways to their consumers. DASH is the primary gateway to the restaurant consumer, and they will likely capture significant market share in the digital advertising space.
