In the search for profitability, DoorDash will increase subtotal minimums for orders via its subscription service DashPass. Starting Aug. 12, the hikes will vary by store, city, and time of day.
Currently, users of the subscription service DashPass pay $9.99 a month for free delivery and reduced service fees. But they must meet a total minimum order of $12 of food, or $25 for groceries to receive the discounts.
The company said, in a statement to Quartz, that new subtotal minimums will apply to convenience stores, drug stores, and liquor store orders, but not restaurants. Delivery from these retailers are particularly costly for DoorDash, as customers may just order a pint of ice cream or a bottle of wine.
“As we continue to expand our offerings to bring customers more selection, including fresh groceries, convenience and retail items, we are testing and learning what makes the most sense to support all sides of our business, including customers, merchant partners, and Dashers,” said Annabel Sandhu, DoorDash’s product communications manager.
With tech stocks being volatile and investors demanding to see profits, on-demand delivery apps are seeking all routes to make money. For delivery companies in particular, this also coincides with the world opening back up and people reverting back to pre-pandemic habits, leaving home for food and groceries more often.
There are only so many levers that on-demand delivery companies can pull to make the economics work, as profits from delivery are spread thin. But one way for these companies to make more money is by adding a wider range of offerings, such as delivering groceries because it easily becomes routine, resulting in more frequent ordering. Another way is to raise the minimum order, which leads to higher profits per order.
DoorDash’s total minimum order increases come as restaurants may be growing less reluctant to be on the delivery platform because diners eating out again and they make more money from onsite customers than from delivery. It also means that customers will need to pay more to receive free delivery, which in turn, makes delivery more costly. The question going forward now is whether customers will want to continue to pay up.