PALO ALTO, U.S. -- U.S. food delivery giant DoorDash launched its Japan operation on Wednesday, a move that is expected to further intensify the already fierce competition for a slice of the country's food delivery market.
Based in San Francisco, DoorDash provides delivery services in the U.S., Canada and Australia. Japan will be the first Asian country in which it operates.
Starting Wednesday, customers in Sendai, a major city in northeastern Japan, can order from hundreds of local restaurants as well as national chains via DoorDash.
"Japan is one of the largest delivery markets in the world, but it's still very underpenetrated relative to the size of the population and the size of the economy," DoorDash co-founder and CEO Tony Xu told Nikkei Asia in an interview on Tuesday.
Nikkei Asia reported in January that the SoftBank-backed company was looking for a country manager to prepare for a launch in Japan.
"The enthusiasm for DoorDash has been overwhelming, with Dashers and merchants signing up for our launch. We are looking forward to supporting the growing Sendai economy," DoorDash Japan Country Manager Ryoma Yamamoto said in a statement.
The company said its Japan team is small but growing as the company expects to offer services in more cities.
Uber Eats Japan and Demae-can are the two largest food delivery companies in Japan, though the market remains mostly untapped.
In the past year, the COVID-19 pandemic has spurred rapid growth in the food delivery market, with revenues up 50% from 2019 to 626.4 billion yen in 2020, according to NPD Japan, a market research company based in Tokyo. The growth rate was around 5% a year before the pandemic.
Only about 5% of restaurants in Japan have their own delivery fleets. While consumer demand for food delivery is skyrocketing, many restaurants, especially small businesses, lack the technological and logistic capability to keep up with growing demand.
DoorDash picked Sendai as the pilot city in Japan because it has an even lower market penetration rate, but a large population and thriving small business scene. DoorDash aims to bring more local shops online to better connect with customers.
"Most small businesses in Japan are still offline," Xu said. "There are lots of cities with large populations that do not really have access to delivery. ... We think Sendai is a very very exciting place to start."
DoorDash has been a clear leader in the U.S. food delivery sector since 2019, according to market intelligence company Edison Trends. It controls about half the country's food delivery market, giving it a sizable lead over UberEats, Grubhub and others.
The company has been able to grow faster than the competition by identifying underpenetrated markets, such as suburban areas in the U.S., and building its brand ahead of rivals. Choosing Sendai instead of larger cities such as Tokyo seems to be a continuation of this strategy.
At the same time, the company says it recognizes the Japanese market may present its own challenges.
"I don't think there's a copy-and-paste solution here," Xu said. "Japan is obviously incredibly different from the United States. ... There's low penetration on the merchant side, and there's probably wildly different consumer expectations from consumers."
DoorDash's success at home does not guarantee the company will win the delivery war in Japan.
German food delivery heavyweight Delivery Hero launched its Japan operations last September, and Chinese ride-hailing giant Didi Chuxing rolled out a food delivery service in Osaka last year. Meanwhile, Japan's telecom giant KDDI is set to invest in the country's third-largest food delivery service, Menu.
While DoorDash might not be the first to enter the Japanese market, Xu said there is still plenty of market share up for grabs.
"Regardless of whether you started a couple of months before or a couple of years before, or even a couple of months later or a couple of years later than us, just look at the fact that we're talking about the third-largest economy in the world where [food delivery] penetration rates are much less than fractions of countries that are a quarter of its size," Xu said. "So I think there's a pretty large opportunity in Japan."