Commentary

Amazon Canceling Its Restaurant Delivery Service In The U.S.

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.

5 comments about "Amazon Canceling Its Restaurant Delivery Service In The U.S.".
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  1. Ed Papazian from Media Dynamics Inc, June 12, 2019 at 8:15 a.m.

    According to unsubstantiated rumors, they are now considering a new service, tentatively dubbed "AmazonChef". In this scenario, subscribing homes would order a meal and a robot chef, complete with the ingredients, would be transported to the home via a drone, then prepare the meal and serve it to the folks---who would also get tons of ads---depending on what they ate, of course. I like this idea so much, I may preempt Amazon and go for an IPO, raise $500 million and do it myself.

  2. Ron Kurtz from American Affluence Research Center, June 12, 2019 at 7:20 p.m.

    Does this indicate Amazon can be fallible, despite having an enormous base of repeat customers that gives them major advantages over their compeititors.? Or does it indicate the business model for restaurant delivery of food (causing increased costs and the restaurant's loss of beverage and dessert business, the major sources of restaurant profits)?  

  3. Paula Lynn from Who Else Unlimited replied, June 12, 2019 at 8:47 p.m.

    Traffic, parking or lack thereof, perishables, packaging costs and know they will be taking a big environmental hit soon, delivery folk, delivery cost - gas, etc. timing - remember Domino's promising delivery in 30 minutes ? 

  4. R MARK REASBECK from www.USAonly.US , June 12, 2019 at 9:59 p.m.

    The tech nerds who want an APP to do everthing but operate toilet paper, (then again , maybe there is one), just don't get it that this home delivery of everything is SATURATED
    to the point where all the hub-grubs will go away.  But yet , they keep pushing for self driving cars to deliver the food and groceries that only a minute portion  of the population would ever uses, Just because you can develop a technology, doesn't mean it's a great idea.
    case in point , thumbng through a paper product catalog is 10 times faster than having to search through  multiple screens on a computer.

    We need to retreat before we hurt ourselves.

  5. Ron Kurtz from American Affluence Research Center replied, June 13, 2019 at 11:27 a.m.

    Right on Mark. Wonder when Wall Street will understand this. 

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