In a rare retreat, Amazon is shutting down its restaurant delivery service in the U.S. on June 24 after wandering somewhat aimlessly since its launch in Seattle in 2015 and its subsequent expansion to more than 20 metro areas.
“The service gave Prime members a way to get meals delivered to their door, using the Amazon Restaurants website or through the Prime Now shopping app,” writes GeekWire’s Taylor Soper, who broke the story. “Amazon will also shut down Daily Dish, a workplace lunch delivery service that launched in 2016, on June 14.
“The company had been updating its Amazon Restaurants blog up until last month, and its Twitter feed is still active,” he adds.
Well, that was then. The Twitter feed is gone this morning.
“Amazon started the food-delivery service as on-demand meals were becoming big business for tech startups, with companies like Postmates, DoorDash, Caviar, and Uber Eats competing to deliver food from restaurants to consumers. Others, like Sprig and Maple, went further, vying to both prepare and deliver freshly cooked meals. In the U.S., Amazon Restaurants was available for free to customers with a $119-a-year Prime account,” Alison Griswold writes for Quartz.
But “Amazon Restaurants has struggled to gain a foothold in the restaurant delivery market. Together, UberEats, Grubhub and DoorDash control nearly 80% of the restaurant delivery business, according to the research firm Edison Trends,” David Yaffe-Bellany writes for the New York Times.
“The rough-and-tumble food-delivery business is swarming with competitors and is largely unprofitable," observes Sebastian Herrera for the Wall Street Journal.
“It’s very labor-intensive to pick up food from a restaurant one or two meals at a time and financially is a disaster,” food industry analyst Phil Lempert tells Herrera. “No one really knew about [Amazon Restaurants], and they did not do a great job of marketing the service.”
Grubhub, whose stock price had slipped more than 38% over the last year, was popping on the news, up 8.23% on the day.
“Analysts have been quick to point to the benefits for Grubhub: Cowen’s Thomas Champion, a Grubhub bull, writes that Amazon’s decision is a ‘modest positive,’ as it ‘clarifies the landscape and removes a cash-rich potential competitor,’” writes Teresa Rivas for Barron’s.
“Likewise, Mizuho’s Jeremy Scott writes that while Amazon could choose to re-enter the delivery space at some point in the future, ‘it at least temporarily removes the existential threat of an aggressive organic expansion and, in turn, positions the company as a potential acquirer,’” Rivas continues.
Indeed, “Amazon isn’t withdrawing from the food delivery market entirely. It still sells nonperishable food from its main online store, and it also delivers groceries from Whole Foods in certain locations in the U.S.,” Jon Porter points out for The Verge.
“It also runs its AmazonFresh service, which costs an extra $14.99 per month on top of Prime. Amazon has tested making grocery deliveries directly to the trunks of Fresh customers’ cars. But its takeout delivery ambitions now appear to be focused outside of the Amazon brand after it recently invested in Deliveroo amid reports that its attempt to buy the delivery company had fallen through,” Porter adds.
“London-based Deliveroo operates in 14 countries, including the U.K., France, Germany and Spain, and -- outside of Europe -- Singapore, Taiwan, Australia and the UAE. Across those markets, it claims it works with 80,000 restaurants with a fleet of 60,000 delivery people and 2,500 permanent employees,” TechCrunch’s Jon Russell reported at the time of the investment.
“It isn’t immediately clear how Amazon plans to use its new strategic relationship with Deliveroo -- it could, for example, integrate it with Prime membership -- but this isn’t the firm’s first dalliance with food delivery. The U.S. firm closed its Amazon Restaurants U.K. takeout business last year after it struggled to compete with Deliveroo and Uber Eats,” Russell continued.
“For now, there is no need for Amazon to duel with UberEats and the other delivery companies, said James Cakmak, a former internet stock analyst who tracks food delivery companies,” the NYT’s Yaffe-Bellany writes. “‘It can monitor the situation and potentially buy up one of these entities, or make a strategic investment, or wait till the dust settles and go at it on its own,’ he said.”
IOW, SOP for AMZN.