A global pandemic is not the time to be audacious, but with its food delivery service already in the works, Amazon began offering online food delivery in Bengaluru, India last week. The internet giant rolled out Amazon Food in pilot areas around the IT parks of Bengaluru, with the service expected to be scaled up across the city and eventually to other locations.
Amazon Food will be available to residents in Whitefield, Bellandur, Marathahalli, and Mahadevapura in Bengaluru. In preparation for the launch, the company began testing the food delivery service with select restaurant partners in Bangalore. Some of the restaurants and cloud kitchens Amazon has partnered with include Adiga’s, FreshMenu, Paradise Biryani, Box8, Faasos and Mad Over Donuts.
While the launch is not surprising, the timing certainly is. Restaurant owners were already speaking with Amazon representatives since late last year, with some expecting the service to go live by Diwali 2019, but then it seemed Amazon had put the plan on the back burner. The buzz around Amazon Food returned in January this year when Uber Eats exited the Indian market by selling to Zomato.
Yet, little was heard of Amazon Food — until last week, smack in the middle of a pandemic. With this move, the company will be competing with established players Swiggy and Zomato. The two market leaders are cutting jobs by the thousands, shutting down loss-making cloud kitchens, looking for ways to reduce burn and cutting commissions of delivery executives.
Another challenge is pushback from restaurant partners that are working with an industry body to exit these aggregator platforms. Amazon’s statement that accompanied the launch of the delivery business reflected these market realities. “We are launching Amazon Food in select Bangalore pin codes allowing customers to order from handpicked local restaurants and cloud kitchens that pass our high hygiene certification bar,” it read.
Amazon itself is facing the heat of the pandemic – the company’s mainstay e-commerce business in India was shut for more than six weeks. Thanks to the surge in job losses and salary cuts, consumption will remain smothered. So, why did Amazon decide to take the plunge? The question that top Amazon executives asked was not “why now?” but rather “if not now, when?”
By entering food delivery, Amazon is exploring alternate revenue streams. The e-commerce company has already expanded into fintech, entertainment, grocery and fruits and vegetables. The massive distribution infrastructure in India at the center of these businesses will help Amazon in food delivery as well and offers its consumers an additional service.
Another key factor that Amazon likely took into account is the simmering anger among restaurant partners. They have multiple complaints against Swiggy and Zomato, starting from high commissions, lack of transparency in pricing and complete cloaking of user data.
But food delivery is a difficult business in India. Consumers who order almost daily are extremely price sensitive and are constantly looking for offers and discounts. Order values are much lower than global standards, making unit economics very tough. Nonetheless, Amazon’s entry is expected to shake up the food delivery business in India.