Dive Brief:
- Amazon is closing its London-based food delivery service tomorrow just two years after launch, according to an Evening Standard report confirmed by a company spokesperson.
- Amazon Restaurants, which is exclusive to Prime members, launched on the promise of no hidden service fees and free delivery for orders of $19.09 (15.00 pounds) and above, but eventually included a flat fee of $2.53 (1.99 pounds). The e-commerce giant's service delivered food within an hour from 200 restaurants.
- Amazon Restaurants is still operating in the U.S. The company also recently expanded its Daily Dish service, which allows office workers to order lunch specials via text or through the Amazon or Prime Now app, to Austin, Texas.
Dive Insight:
Amazon's retreat from the U.K delivery market could be like a canary in a coal mine, signaling to potential entrants that there isn't enough air left to breathe in this competitive space. The segment is already dominated by Just Eat, Deliveroo and Uber Eats — services that make it easy and inexpensive for consumers to order delivery from their favorite restaurants.
Amazon's service, however, came with strings attached. Though the offering's connection to the e-commerce giant's Prime membership may have appeared as a good way to boost brand loyalty, it was a barrier to entry for consumers who weren't members, which significantly reduced the company's reach.
"This makes it considerably less attractive for operators and restaurants to join the service, especially as many will already be working with Uber Eats, Deliveroo, Just Eat or a mixture of the three," Lewis Towell, foodservice analyst at GlobalData, told Verdict Foodservice. "This in turn means there is less variety on the service, ultimately pushing consumers towards Uber Eats, Deliveroo or Just Eat."
The service's closure in the U.K. follows reports that London-based rival Deliveroo is looking to raise up to $500 million from investors. It's possible that the funding, which would boost the company's valuation from $2 billion to about $4 billion, could be an attempt to strengthen its negotiating power with Uber — which has been rumored to be interested in acquiring Deliveroo.
A deal would broaden Uber's footprint in the U.K. and could help it defend its turf in European markets. Deloitte named Deliveroo the second-fastest growing U.K. tech firm for the second year in a row, and the company plans to add 5,000 restaurants to its current contingent of 10,000 eateries. If Uber were to make a move, Amazon's exit would give the combined companies space to flourish. Even if no deal comes to pass, Uber is doubling down in Britian, with plans to triple staff next year.
Amazon faces growing competition stateside, as well. DoorDash recently partnered with TripAdvisor, which is already working with powerhouse Grubhub and OpenTable, and Waitr was acquired and taken public by Landcadia Holdings earlier this month. As consumer demand for convenience grows, this M&A activity shows no sign of slowing down, though whether this means better growth opportunities for incumbent companies or new upstarts remains to be seen.
