Amazon India Will Launch Food Delivery In Few Weeks; Partnership With Bangalore Restaurants Successful

Last month, Uber sold its Uber Eats to Zomato in exchange for a 10% stake. After the surrender of Uber Eats to Zomato, Amazon is set to give a tough competition to the food delivery giants in India, Swiggy and Zomato!

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What is Amazon Aiming At?

Amazon has established a dense delivery network in India through its own logistics chain and also through partnership with thousands of neighborhood stores. 

The e-commerce giant plans to enter the Indian food delivery market.The launch of the service, which would be offered as part of either Amazon’s Prime Now or Amazon Fresh platform, could happen as soon as next month, a person familiar with the matter told TechCrunch. Amazon’s move to enter food delivery aims to build an extensive product portfolio – from grocery and food to electronics and home products – for its top customers who have availed of its Amazon Prime paid subscription service.

According to a source who maintains anonymity as details of business are still private, while gearing up for the launch, Amazon has been testing its food delivery service with select restaurant partners in Bangalore.  According to the company’s executive and restaurant partners, currently Amazon’s food delivery platform is open only to own employees and testing of the service  is in progress across five high density localities in the city –HSR, Bellandur, Haralur, Marathahalli and Whitefield. 

The development comes at a time when Swiggy and Zomato have cut discounts and tightened cost structures.

The company has been working on its food delivery business for a while now and was previously directing to launch it during the festival of Diwali. It’s unclear what caused the delay.

An Amazon spokesperson told TechCrunch, “We believe in innovating on behalf of our customers to create newer experiences for them. As part of this commitment, we are constantly evaluating new areas and opportunities to connect with and serve our customers. We will come back to you when we have something to announce.” 

Meanwhile, the company’s potential rival strikes into the food retail business after selling a majority stake in the company to Walmart for $258 million last year. Kalyan Krishnamurthy, Flipkart Group CEO, in a statement to TechCrunch in October had said, “Flipkart has registered an entity called ‘Flipkart Farmermart Pvt Ltd’ that will focus on food retail.”  according to reports last month, the company made its maiden delivery of fresh fruits and vegetables, 

Can Amazon Sustain Where Swiggy and Zomato are Still not Profitable?

Amazon’s breach into the food delivery market would pose as a tough competitor for Prosus Ventures-backed Swiggy, and Zomato, a 10-year-old startup. Both Swiggy and Zomato, having raised more than
$2 billion together, are still not profitable, losing more than
$15 million each month to acquire new customers and sustain existing ones.

Anand Lunia, a VC at India Quotient, said in a recent podcast that the food delivery firms have little choice but to keep subsidizing the cost of food items on their platform as otherwise most of their customers can’t afford them.

According to estimates by Bangalore-based research firm RedSeer, figuring out a path to profitability is especially challenging in India as unlike in the developed markets such as the U.S., where the value of each delivery item is about Rs 2000; in India, a similar item carries the price tag of Rs 300.

Swiggy alone operates in more than 520 cities in India and maintains partnership with over 160,000 partners. According to RedSeer, Swiggy is adding 10,000 new partners to its platform each month, it said last week on the sidelines of its latest fundraising announcement. India’s food delivery market was worth $4.2 billion as of the end of 2019.

In recent years, both Swiggy and Zomato have expanded their businesses beyond food delivery. Swiggy today runs what it claims to be the largest cloud kitchen network in India, and has also expanded to delivery of just about any item (not just food). Zomato has been working on ‘Project Kisan,’ to procure raw material directly from farmers and fishermen in an attempt to assume control of the supply of items to restaurants. Hence, taking this into consideration, it would not be very easy for Amazon to establish its food delivery business in India.