Photo: Amazon
Is Amazon really out of the restaurant delivery business for good?
Amazon Restaurants, the e-tail giant’s restaurant delivery service launched in 2015, will not deliver any more meals after June 24, GeekWire reports.
The service, which was expanded to more than 20 cities in the U.S. as well as London after its launch in Seattle in 2015, was intended to give Amazon Prime members a means to have meals delivered to their homes. Customers placed orders either through the Prime Now shopping app or on the Amazon Restaurants page.
While not reported at the time, it now appears that when Amazon ended deliveries in London last December, it was an indication of what was to come in the U.S. Amazon has also decided to end its Daily Dish lunch delivery service to office locations.
While Amazon appears to have thrown in the towel on figuring out the special sauce of restaurant deliveries, it may be too soon to count it out. The company led a $575 million funding round for Deliveroo, a former rival to Amazon Restaurants in the UK. The service, which delivers meals in over 200 cities outside the U.S., competes with Uber Eats, GrubHub and others operating in the same space. With the latest round of funding, Deliveroo has raised more than $1.5 billion since being founded six years ago.
- Amazon to shut down its Amazon Restaurants business in the U.S. – GeekWire
- Amazon Ends Restaurant Delivery in Face of Fierce Competition – The Wall Street Journal
- Amazon closes its restaurant delivery service in London – TechCrunch
- Amazon leads $575M funding round for Uber Eats competitor Deliveroo – GeekWire
- About Deliveroo – Deliveroo
Discussion Questions
DISCUSSION QUESTIONS: Do you think the latest news means that Amazon has abandoned restaurant deliveries altogether or does it have something else planned? What do you see as the primary challenges for companies operating in this space?
Poll
BrainTrust
Nikki Baird
VP of Strategy, Aptos
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
Either Amazon is planning on replacing it with their drone delivery program, or they did not find it something that could be automated enough to be worth their time, is my take. Sometimes I think Amazon gets into businesses just to spur other people to dive in and invest money that might otherwise have been actually competitive to Amazon. The company certainly has enough free money from the market that they could afford that as a strategy.
The restaurant delivery space is getting awfully crowded, but at the same time there are underserved markets around the country. (I live in one.) So there is opportunity for fewer brands to expand to more cities and countries — gaining market share and economies of scale along the way. Amazon is not usually interested in a market unless it can be dominant, but Deliveroo may be a sign pointing toward its future plans.
Watch this space. I would be surprised if Amazon is done forever. Rather, I imagine they are regrouping, looking for ways to leverage tech in ways to make the restaurant delivery business more efficient and profitable. In Deliveroo, they have a robust lab for tests and trials.
Absolutely Amazon is debriefing and regrouping. I’m staying tuned to see what they will launch next — maybe their own branded restaurants.
Ha! I had the same suspicion re: restaurants, Patricia! I just didn’t include it in my comment. Great minds think alike!
No surprise here. You could see this coming when they shuttered the program in the UK last year. A hot competitive market where it is hard to hold top position, and then racing against Uber and Grubhub, who have been seeing big growth in recent years, has made it difficult. So they didn’t crack the market like they thought they could. I suspect that they’ll still deliver from Whole Foods.
Of all the businesses Amazon is involved in, restaurant delivery makes the least sense. It is an outlier and doesn’t really take advantage of their core competencies. Amazon is geared for massive execution. Restaurant delivery is a one-up business.
There are already movers and shakers in the home delivery space with a strong value proposition. Postmates, for instance, offers free delivery from certain restaurants and puts a percentage of sales back into customers’ Acorns savings accounts.
As to whether Amazon will re-enter the space, it all depends on whether Amazon can come up with something unique to add to what’s already being done. If Amazon perfects drone delivery for food products before the competition, then I could see Amazon sales outpacing the competition.
Amazon my not be throwing in the towel on restaurant delivery, they may just be switching gears. Their investment in Deliveroo may be a signal that Amazon is considering acquiring Deliverooo. It is hard to tell with Amazon.
However, Amazon may also be leaving this service up to the dispersed and decentralized long list of competitors that are addressing this need. It is challenging to make a lot of profit in this service, as consumers have limited price elasticity and competition will continue to drive down prices.