🍕 Amazon Now Competing with Zomato and Swiggy?
Amazon entered the food delivery business two years ago. So far it has been going slow and steady, but now it is trying to win the delivery race.
In today's times, if you are thinking about ordering food, you are thinking about two words: Zomato and Swiggy.
These apps have almost put an end to the old process of calling a restaurant and ordering in.
And for years now, only these two apps have persisted in this space.
Many like Ola Foods and Foodpanda, tried to enter this space, but these sharks didn't let anyone survive.
But now a whale has entered the space: Amazon. And things are looking interesting.
👀 Amazon's Entry into Food Delivery
Believe it or not, Amazon has been in the food delivery business for two years now.
Shocked? So were we.
It is weird that the tech giant has kept this whole operation so quiet.
Even if you look at Amazon's app, you won't get a hint that it delivers food. Until you type in Amazon Food (go ahead, try it).
And for two years, Amazon has slummed it out in only one city: Bengaluru.
So far, Amazon Food is only available in 65 pin codes and it has on boarded over 2,500 restaurants.
Now, this raises a lot of questions. Why food? Why Amazon? Why only Bengaluru?
Let us begin by answering the first one.
You see, you and I view Amazon as this tech giant whose founder is a billionaire. The company literally sells everything, so it must be hugely successful no?
Well, successful maybe, but profitable, not really.
Despite investing $6.5 billion in India, it has been unable to make profits.
In fact, this year its losses jumped from Rs. 161 crores to Rs. 480 crores.
One major reason could be India's various e-commerce laws that have made things super difficult for Amazon and also Walmart.
Our laws forbid e-commerce platforms from becoming retailers. Which means they can't sell their own products on their platforms. For some time these companies got around these laws by partnering with third-party sellers and forming joint ventures.
But the government also banned e-commerce platforms from hosting retailers in which they hold a stake. It also banned deep discounting and sales of exclusive products.
What's more, even stricter rules could be hitting this space soon.
So, Amazon is trying to diversify its revenue streams.
But it hasn't done a great job so far. Like we said, it has only stuck to one city and even there it isn't doing a great job.
🤔 Why Amazon's Food Business isn't Working Out
When Amazon began onboarding restaurants for its food delivery business, it had a strict list of 120 rules! This included things like regular water checking.
Because of this a lot of restaurants were not interested in dealing with Amazon even though it was charging much lesser commissions than Swiggy and Zomato.
Amazon soon realised its mistake and fixed it. But things still didn't improve.
Restaurants get very few orders from Amazon's platform: about one or two orders per week, which accounts for less than 1% of their total business.
This could be because Swiggy and Zomato have a greater mindshare. When you think of food, you think of them. And this could also be because of the bad experience restaurants and customers have had with Amazon Food.
There is apparently no delivery partner tracking, deliveries are often delayed, or even abruptly cancelled, leaving restaurants and customers with a sour taste in their mouth.
But Amazon seems to have improved its experience. We recently ordered dessert from Amazon and it was delivered within 40 minutes. We got a Rs. 100 discount on the first order and delivery was free because we already had a Prime membership!
This and the fact that Amazon takes only 10-15% commission as compared to Swiggy and Zomato's 30% commissions, could help the company beat the two major giants.
Especially as it is finally ready to capture another city: Pune.
And Amazon has enough cash to burn to scale up. So, if it decides to get serious about the food business, it could majorly disrupt this space.
However, so far it seems that the company has been treating this like a side project. Unless it gets serious, it will become just another failed food delivery app.
But Swiggy and Zomato are not the only roadblocks in Amazon's path to profitability.
✊ Restaurants Rise Against Food Aggregators
Restaurants are sick and tired of paying such high commissions to Swiggy and Zomato, as they take off a major portion of their profits.
And in return, they don't even get customer data. These apps use it for their internal purposes like launching cloud kitchens.
So, restaurants have now gone back to the old-age direct delivery system.
They are sneaking in pamphlets into Swiggy/Zomato orders that encourage customers to order directly from the restaurants.
And to ensure fast deliveries they are relying on Dunzo, ShadowFax, DotPe and ThriveNow.
Even fast food chains are now trying to promote their apps instead of the aggregators'.
For instance, Dominos' launched a rewards program that gives customers a free pizza after they have ordered six.
The six pizzas can be ordered from anywhere but the free pizza needs to be ordered from Domino's own app, driving fresh traffic to it.
However, it is difficult to assess if these efforts will actually make a sizeable dent in Swiggy's and Zomato's market share.
Right now, their biggest concern is a probe by the Competition Commission of India over anti-competitive practices and unfair pricing.
But for Amazon, these efforts could be a death knell. It is just trying to break into a market where odds are already against it. Will it be able to make a space for itself in this market?
Only time will tell.
⚡In a line: Amazon has entered the food delivery business and is offering great perks to restaurants and customers both which could impact Swiggy-Zomato's duopoly.
💡 Quick question: Swiggy and Zomato have both been struggling to become profitable in the food delivery space. What will it take for Amazon to crack the foodtech profitability code?
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