WHEN: Today, Wednesday, December 9
WHERE: CNBC’s “Squawk on the Street”
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with DoorDash Co-Founder and CEO Tony Xu on CNBC’s “Squawk on the Street” (M-F 9AM – 11AM ET) today, Wednesday, December 9th. Following is a link to video on CNBC.com:
All references must be sourced to CNBC.
JIM CRAMER: Joining us now exclusively DoorDash Co-Founder and CEO Tony Xu. Tony, first, congratulations. I know this is a huge deal and it’s not like you were born running big restaurants but you were in the restaurant business when you started.
TONY XU: Absolutely. It’s great to be with you, Jim. You’re right. I wasn’t born in a big restaurant. I was born really as a son to immigrants who came to this country to make a better life for me and it’s, you know, people like my mom who we started this company for. My mom came to this country who worked three jobs a day for 12 years, one of which was at a local Chinese restaurant and I got to see that a bit washing dishes on the side with her. And so, it certainly is a big day for all of us at DoorDash and it’s a huge day for all of the businesses we serve as well.
CRAMER: Tony, I think a lot of people interpret your company as being a delivery company. It comes, the woman comes to your door, gives you the package, contactless these days, but actually, your DoorDash platform that makes a lot of people money, not just DoorDash.
XU: Absolutely, I mean DoorDash is a platform whose goal is to grow and to empower local economies. We’ve been fortunate to have generated tens of billions of dollars of sales for brick and mortar businesses and billions of dollars of incremental earnings opportunities for millions of dashers. Really, if you think about what we’re doing, we’re bringing online for the first time many of your favorite local businesses that have never been able to compete in the convenience economy before. And, so there’s a huge economic transformation underneath all of us, and we’re there, right there with them, bringing them to the forefront.
CRAMER: Now, I know it’s a big day for you. I know that you really own the suburbs and small cities, but you did something I think was really special. I want to mention it because I think these are the things that we in the media have to mention. You introduced a new initiative to support Black-owned businesses on DoorDash, tell us about that.
XU: Well, DoorDash really is a reflection of all of the local communities that sustain us and if you think about all of the turbulence that we’ve seen certainly not just in this year but frankly in the past decade, there’s been a lot of change and I think a lot of issues and topics are now getting the attention that they deserve. I think one of them has always been making sure that there’s an equal playing ground for everyone. I’ve always believed that talent is evenly distributed but access to opportunities isn’t and, you know, whether it’s highlighting Black-owned businesses or our Kitchens Without Borders initiative that highlights immigrant restauranteurs for the first time and giving them their shot just like everyone else deserves. That’s really what DoorDash is about.
DAVID FABER: Tony, it’s David Faber. A couple of quick questions about just the current environment, specific to the pandemic which obviously has benefited your business, but we’ve seen a number of your key markets pass what they say are temporary laws to cap your commissions or your marketing fees at 15% or 20% combined. How is that affecting your business right now? Is there a concern perhaps that that will actually be extended when the pandemic is over or are you able to sort of deal with it by passing it along to the consumer?
XU: Well, let me start by saying that just like everyone else, I wish that the pandemic is over or will be over soon. I truly wish that we would be having this conversation right now inside Jim’s restaurant or inside one of the many fantastic local restaurants in this country so that that’s really my first priority making sure with others to bring forth that solution. I think when it comes to merchants certainly in the three decades that I’ve been observing the restaurant industry, this is one of the most difficult if not the most difficult obstacle that I’ve seen restaurants to have to overcome. I mean it’s why, for example, we were the platform that cut 50% of our commissions at the onset of this pandemic, why we built products like daily pay so merchants can get their payments every single day just because liquidity is king in surviving a crisis. It’s also why we build many products so that there wouldn’t even be conditions on whether it’s DoorDash Drive or DoorDash Storefront so that merchants can create more channels to, to be able to survive this pandemic. I’m super proud of a lot of the initiatives that we’ve built in order to allow merchants to have six times the odds of surviving the pandemic versus the average restaurant and for me, it’s really about figuring out, you know, how are we going to do that. And how are we going to drive incremental sales and that’s why I, DoorDash, we’ve always been more about making sure that we can help merchants grow out of this pandemic instead of, you know, seeing local officials and elected officials try to suppress the demand that go into these stores.
FABER: Yeah. Do you ever see though pricing coming down for the restaurants? I mentioned it because there are a number in my area, in New York City, that encourage people to come and pick up their food themselves and get a bonus as a result of doing that so they can avoid services like yours because they’re so costly for them?
XU: Well, one of the things that, you know, we do at DoorDash is we both have a marketplace in which we’re bringing new customers for these restaurants for the first time generating tens of billions of dollars of activity for them over the past several years that we’ve been in business. And the other part of what we do is we have a platform where we create products like DoorDash Storefront that gives small businesses an online ordering solution that they can have that direct relationship with their customers. We’ve built products like DoorDash Drive, so that they can actually offer same day and on demand commerce to their own customers and just like we do to ours. I mean to me this is about an ecosystem and about an initiative in which we’re trying to bring online these businesses. I mean only 10% of takeout sales in the industry actually happened through a digital connection. 90% of the time, we’re still placing phone calls to get takeout orders, we’re still driving, you know, to do pickups through drive-throughs and the like. And so, if you think about what’s happening, we’re creating a big transformation to help these businesses come online and there’s a cost to doing that. I mean, we invest hundreds of millions of dollars in marketing to generate business for these businesses. We paid billions of dollars to dashers so that they can receive the incremental work opportunity that they desperately need, especially in times like the one we’re in right now. And we also have to pay for payment processing and customer service and really take care of the end-to-end experience in order to serve these businesses.
CRAMER: Yeah, look, as a point, my restaurants are multiple by now but as a customer can leave DoorDash, the incremental gains are terrific and needed. One thing is certain, you’re growing and part of that because at 200% which is remarkable it’s even faster than Snowflake but is it true Tony that some people gonna say well, I’ll never make money yet at the same time, if I were in your shoes, I would like to spend as much as I can so that I have the big moat and no one can beat me.
XU: DoorDash has always cared about growth and profitability. I mean, in fact, it’s why we revealed in our S-1, the cohort economics I think that have demonstrated really what the business looks like under the hood. And you’re absolutely right, Jim, that we’re in the investment phase right now because we’re so early into the opportunity. I mean if you compare this industry with others, 10% of restaurant sales are being delivered today. If you look at ecommerce, they’re closer to 20% in total retail sales and if you look at travel, over 50% of travel sales are now online so we’re playing in one of the biggest, yet still most under-penetrated categories in the world. So right now, the time is really to invest.
FABER: Tony, in a year from now, it’s even possible if not likely that your sales growth rate is going to slow dramatically given the incredible gains you’ve had this year because so many people are home using your service. If and when that happens, where are you going to be focusing people on to show that the business is still actually growing significantly? What metrics are you going to rely on to tell the positive story that I would assume you’ll be trying to tell let’s call it, six, eight months from now?
XU: Well I think we have to think about where secular trends tend to go and what tends to happen once habits are formed. You know, certainly there will always be fluctuations in activity and obviously with tailwinds, there will be changes to the business. At the same while, if you think about how we behave as consumers, once we get used to a habit, whether it’s buying things over the internet, whether it’s buying travel tickets now through a mobile app instead of through a phone call, we tend to stick to those habits. And when I think about this business over the long run, that’s where we’re investing towards. We’re investing to add new use cases so that we can keep helping these businesses compete in the convenience economy or serving other categories like grocery and convenience so that consumers can get everything inside their city delivered to them in minutes, not hours or days. We’re building more products so that merchants can build their own end-to-end tech stack and effectively not have to rely on us because that’s how they’re going to make it in the long run and it’s also how we’re going to have a great business partnership for the long run. And we’re investing in new geographies so there’s a lot of surface area that DoorDash has as a business today and I think it really reflects a lot of the strong demand that we saw during our IPO process.
CARL QUINTANILLA: Hey Tony, a little more broadly, big story in New York this morning is this proposal to add a $3 tax on deliveries to help fund the MTA. I know it’s packages but I wonder if you fear that municipalities are going to say this is a big structural shift. It’s a cash cow. It’s a way for us to save our tax base and it’s going to test consumer price elasticity over time.
XU: Well, I think that governments have a very tough job to do. And I think that you know this is why at DoorDash, we care so much about working in concert with them and making sure that we can provide the best solutions for everyone, especially during a pandemic. And to me, when I think about something like commerce, the way that commerce helps grow GEP inside of a city or inside of a country is, we have to maximize commerce, that’s how we maximize the number of opportunities for everyone and when we can grow the economy, that’s actually how we get past something as difficult as the pandemic.
CRAMER: Tony, we want to thank you so much for coming on “Squawk on the Street.” Congratulations on your very big day and all you’ve accomplished at a very young age. Tony Xu, Founder, CEO of DoorDash. Great to see you sir. Carl.
XU: Thank you. Good to see you too.
