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Why Amazon Launched its Food Delivery Service Amid a Pandemic

Why Amazon Launched its Food Delivery Service Amid a Pandemic

Amazon Food launched last week in Bengaluru, the capital of India's Karnataka state.

A global pandemic is not the time to be adventurous, 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, Money Control reported.

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.

Related: Amazon Now Accepting Food Stamps in Seven States

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, until last week, little was heard of Amazon Food. Until is decided to make its voice heard, right 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.

Pushback from restaurant partners that are working with an industry body to exit these aggregator platforms presents another challenge. Reflecting these market realities, Amazon’s statement that accompanied the launch of the delivery business read: “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.”

Amazon’ mainstay e-commerce business itself is facing the heat of the pandemic as it was shut for more than six weeks in India. Thanks to the surge in job losses and salary cuts, consumption will remain low. So, why did Amazon decide to take the plunge? Top Amazon executives asked not “why now?” but rather “if not now, when?”

Amazon is exploring alternate revenue streams by entering the food delivery business. The e-commerce company has already expanded into fintech, entertainment and grocery. 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.

Amazon also likely took into account the simmering anger among restaurant partners. Multiple complaints against Swiggy and Zomato have been lodged, starting from high commissions, lack of transparency in pricing and complete cloaking of user data.

But food delivery is not an easy business in India. Consumers are extremely price sensitive, constantly looking for offers and discounts. Since order values are much lower in India than global standards, unit economics become very tough. Nonetheless, Amazon’s entry is expected to shake up the food delivery business in India.