Amazon Will Shut Down Food Delivery Business In India: How Will This Impact Restaurants?

Amazon India will shut its food delivery business by the end of the year, according to a communication to its restaurant partners.

Official communication

“After a careful evaluation, we have decided to discontinue Amazon Food from Dec 29, 2022. 

This decision means that you will no longer get orders from customers via Amazon Food after this date. 

You will continue to receive orders till then and we expect you to continue fulfilling those orders,” Amazon told restaurant partners.

This comes after a recent decision to close its fledgling edtech unit by next year.

Continued support

The company has assured that it will meet all its payments and other contractual obligations and will support its restaurant partners through this transition.

They will have access to all Amazon tools and reports till Jan 31, 2023.

Amazon will also provide support till March 31, 2023 for any compliance related queries.

A spokesperson confirmed the news, saying, “As part of our annual operating planning review process, we have made the decision to discontinue Amazon Food, our pilot food delivery business in Bengaluru. 

We don’t take these decisions lightly. 

We are discontinuing these programmes in a phased manner to take care of current customers and partners and we are supporting our affected employees during this transition.”

Unable to compete against Zomato, Swiggy

It had started its food delivery business in select pin codes in Bengaluru in 2020 and gradually scaled it across most of the city.

Restaurant partners said they never saw much traction in order volumes from Amazon.

A senior executive at one of the largest cloud kitchen brands in India said, “Most of my order volumes came from Zomato and Swiggy, and Amazon was not even in double digits in terms of contribution to my overall volumes.”

Amazon has also seen redundancies in its pharmacy business as part of recent layoffs and this will also be evaluated for viability going forward.

Areas of interest

The spokesperson for Amazon India added, “Amazon remains focused on providing our growing customer base the best online shopping experience with the largest selection of products at great value and convenience. 

We remain committed to India and will continue to invest across those areas where we can bring value to our customers including Grocery, Smartphones and Consumer Electronics, Fashion & Beauty, as well as our B2B offerings such as Amazon Business.”

Layoffs

Layoffs have also taken place at its India team. 

At least a few hundred employees have been impacted, but the cuts could run “deeper”.

Globally at least 10,000 employees are being laid off.

In September, research firm Bernstein published a report critical of Amazon India.

Mixed performance, growing losses

It noted that its performance in the country was “mixed”, with continued losses despite infusing  $6.5 billion.

The Amazon India marketplace, Amazon Seller Services, was able to cut losses by almost 23% to Rs 3,649 crore in FY22.

However, losses at its other two businesses – payments and logistics – have widened.

The Bernstein report states that the ecommerce giant has struggled to grow business at a large scale in high-margin categories such as fashion and beauty and personal care, which are dominated by rivals Flipkart and Nykaa, respectively.