Data shows delivery upstarts DoorDash (DASH) and Instacart (CART) cannot compete with Amazon (AMZN).
DoorDash and Instacart are delivery services that take orders through apps. Both companies use contract drivers who provide their own vehicles to deliver orders. The difference is DoorDash concentrates on restaurant takeout orders while Instacart delivers groceries.
Instacart (NASDAQ: CART) held its initial public offering (IPO) on 19 September 2023. Since then its stock has underwhelmed. CART premiered at $30 and fell to $27.31 on 4 October 2023. Similarly, DoorDash (NASDAQ: DASH) began trading at $175 on 11 December 2020 and fell to $77.93 on 4 October 2023. In contrast, Amazon (AMZN) fell from $155.82 on 11 December 2020 to $127 on 4 October 2023.
Why Amazon (AMZN) will win the delivery wars
I predict Amazon (AMZN) will win the delivery wars because its resources are far larger than its app-based competitors.
For example, Amazon reported quarterly revenues of $134.383 billion, a quarterly gross profit of $65.01 billion, and a quarterly operating income of $7.681 billion on 30 June 2023. Similarly, Amazon reported a quarterly operating cash flow of $16.476 billion on 30 June 2023.
Importantly, Amazon can accumulate enormous amounts of cash. For example, it reported a quarterly ending cash flow of $49.734 billion on 31 March 2023. Consequently, Amazon had $63.97 billion in cash and short-term investments on 30 June 2023.
Incredibly, Amazon had $477.607 billion in quarterly assets on 30 June 2023. Thus Amazon has the cash to win the delivery wars. For example, can buy or lease all the vans it needs and hire tens of thousands of drivers.
Why DoorDash (DASH) will lose the delivery wars
In contrast, DoorDash (DASH) reported quarterly revenues of $2.133 billion, quarterly gross profit of $998 million, and a -$211 million quarterly operating loss on 30 June 2023.
DoorDash also reported a -$53 million quarterly ending cash flow and a quarterly operating cash flow of $393 million on 30 June 2023. However, DoorDash reported a quarterly ending cash flow of $2.186 billion on 31 March 2023.
DoorDash had $3.456 billion in cash and short-term investments and total assets of $9.601 billion on 30 June 2023. Hence, Amazon has enough money in the bank to buy DoorDash or finance a competing service.
Moreover, Amazon can run DoorDash out of business by offering free grocery, or meal delivery. Finally, Amazon can afford to run its delivery empire while paying Teamsters level wages. DoorDash cannot. I will explain the Teamsters threat below.
Why Instacart (CART) will lose the Delivery Wars
The newest financial numbers I found for Instacart (CART) were from 31 December 2022. Those numbers show Instacart lacks the resources to compete with Amazon.
For example, Instacart reported annual revenues of $2.9 billion, an annual gross profit of $2.171 billion, an annual operating income of $404,000 on 31 December 2022. Instacart reported a trailing twelve months (TTM) free cash flow of $387 million and a TTM end cash position of $1.935 billion in September 2023. Finally, Instacart had $3.669 billion in Total Assets and $1.945 billion in total capitalization (cash) on 31 December 2021.
Consequently, I estimate Instacart’s December 2021 total capitalization was less than 3% of Amazon’s 30 June 2023 cash and short-term investments. Thus, I cannot see how Instacart can compete with Amazon in any business. I predict Instacart will lose the delivery wars.
How Amazon (AMZN) will win the Delivery Wars
I predict Amazon (AMZN) will win the delivery wars because it has the infrastructure for victory in place. In particular, Amazon (AMZN) has one of the largest delivery fleets in the United States.
For example, Amazon claimed to have over 400,000 delivery drivers in service on 10 August 2020.* Amazon had 40,000 semi-trucks, and 30,000 vans in service in September 2021, CNBC estimates. Notably, Amazon put over 5,000 Rivian (RIVN) electric vans on the road by 6 July 2023.
Amazon claims to have delivered over 150 million packages with Rivian vans by mid 2023. They claim Rivian vans were delivering packages in over 800 cities in the US in 2023. Furthermore, Amazon invested $700 million in Rivian to achieve Jeff Bezos’ goal of putting 100,000 electric vans on the road by 2023, Ars Technica reports.
Finally, there is the secret weapon known as Amazon Prime. Prime encourages people to buy from Amazon by offering free delivery. The number of US Amazon Prime members could grow from 168.3 million in 2022 to 174.9 million in 2023 to 180.1 million in 2024, Statista estimates.
Prime members have a powerful incentive to order from Amazon. That incentive is the $14.99 a month or $139 they pay for Prime. Prime benefits Prime video, free food delivery including a free Grubhub membership, and free delivery of goods ordered through Amazon (AMZN).
Thus, Amazon has 174.9 million Prime customers in the US and a fleet of 30,000 vans to serve them. Consequently, Amazon has the weapons to win the delivery wars in place. I cannot see how either Instacart or DoorDash can compete with this.
How the Teamsters could win the Delivery Wars
After Amazon (AMZN), the big Delivery War Winner is the International Brotherhood of Teamsters.
On 22 August 2023, the Teamsters and UPS (UPS) prevented the largest US strike since 1959 with a historic contract. This contract raises the top pay for full-time UPS drivers to $49 an hour. It also gives existing part-time UPS workers a 48% wage increase over five years. Teamsters also get air conditioning in all UPS delivery vehicles.
UPS executives signed this agreement because the Teamsters could shut their company down. Forcing UPS customers to use alternatives, such as Amazon.
The Amazon Labor Wars Begin
Meanwhile, hysterical news stories about UPS drivers making $170,000 a year are the best advertisement the Teamsters could have. One group that will pay attention is Amazon drivers. The Teamsters are already targeting Amazon.
Notably, Teamsters drivers and dispatchers are striking an Amazon facility in Palmdale, California, and picketing an Amazon delivery terminal in Hollister, California, a press release claims. Teamsters have picketed Amazon fulfillment centers in California, New Jersey, Connecticut, Massachusetts, Michigan, and Georgia.
Interestingly, Battle-Tested Strategies, an Amazon Delivery Partner (contractor), signed a Teamsters contract in April 2023. However, Amazon forced Battle-Tested Strategies to fire the all the Teamsters’ organized workers, a Teamsters press release alleges.
Thus, the Amazon (AMZN) labor wars have begun. I predict Amazon will bow to the Teamsters at some point. Particularly with a shortage of truck drivers in the United States. To explain, Amazon will need to deliver the packages and it will need people to move those packages. Those people will be Teamsters.
If you want to invest in a delivery stock buy Amazon (AMZN) because it has won the delivery wars. I consider Amazon an incredible bargain at $127. I think that bargain will only get better.