Amazon food delivery launch gathers steam with promise of lower restaurant commissions: Report

Amazon food delivery launch gathers steam with promise of lower restaurant commissions: Report
Photo Credit: Photo Credit: VCCircle
6 Sep, 2019

Seattle-headquartered ecommerce major Amazon’s food delivery launch plans for India have gathered steam even as it is onboarding restaurants with assurances of lower commissions.

Amazon has been onboarding restaurants across the country with the promise of commissions as low as 5-6%, which is almost one-third or one-fourth of the 20% currently charged by market leaders Swiggy and Zomato, Mint reported.

The report added that Amazon India is likely to start delivering food from October. The project is likely to be launched first in Bengaluru, followed by  Mumbai and Delhi, the report said.

Amazon is also on the verge of finalising a deal for acquiring the infrastructure of Ola-owned Foodpanda, which has scaled down its food delivery operations diverting its focus to cloud kitchens and in-house food brands. As part of the deal, it is likely to get Foodpanda’s restaurant connections menus, order processing methodology and delivery executives, the report said.

In an e-mailed response, a spokesperson for Amazon said the company does not comment on speculation about “what we may or may not do in future”.

“Over the past year, we have built Ola’s food business grounds up, creating a range of owned food brands through our vast network of kitchens. These brands are now being made available on leading platforms and we continue to partner with more marketplaces, delivery services, as well as prominent food brands, to further expand our offerings,” a spokesperson for Ola said in an e-mailed response.

The development comes more than a month after Reuters reported that Amazon was planning to enter the food delivery segment in India and launch operations before the beginning of the festive season.

The ecommerce major has already partnered with Catamaran Ventures, a private investment firm founded by Infosys’ co-founder Narayana Murthy for this venture.  

Amazon is likely to utilise the existing logistics capabilities deployed for its now rebranded grocery delivery operations Prime Now for its food delivery operations.

The entry of Amazon into the food delivery operations will heat up the competition in the segment in the form of a deep-pocketed player that does not traditionally rely on external sources for its funding needs.

Amazon will now lock horns with Swiggy and Zomato, two well-funded startups that have collectively raised close to $2.5 billion between them.

This is also not Amazon’s first attempt with the food delivery space. In May this year, it announced the shutting down of its food delivery services in the US after ceding to intense competition from GrubHub, DoorDash and Uber Eats.

However, in the same month, it also made headway into the European and Southeast Asian food delivery space by leading a $575 million investment in London-headquartered food delivery major Deliveroo. Deliveroo operates in 14 countries across Europe, Southeast Asia, Australia and UAE.

Amazon’s imminent entry comes in the backdrop of a  recent standoff between restaurant partners and restaurant aggregators over concerns of alleged lack of transparency, deep discounting and abuse of dominant position in the market.

The National Restaurant Association of India (NRAI) last month sent notices to Swiggy, Zomato, Uber Eats and Foodpanda in this regard.

After an initial show of defiance, Zomato has decided to iron out the differences, which had led to multiple restaurants delisting from restaurant aggregation platforms.