Amazon’s food delivery experiments

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Hello Apoorva here. This week I did a status check of Amazon’s grocery delivery business in India, which is now over a year old.

At the outset, the idea of ​​a big tech player with a massive war chest entering a duopoly market signaled more cutthroat competition in the bustling food delivery sector.

But over a year after its limited launch, the Bangalore e-tail giant has been operating mostly under the radar in 70-odd PIN codes.

Several partners who run restaurant chains said they saw that around 1% of their total delivery volume comes from Amazon Food.

Read: Why Amazon still lags behind Zomato and Swiggy when it comes to food delivery

Interestingly, our story coincided with a full-page ad from Amazon Foods on its latest discounts (we’re not claiming this).

Amazon ad
Amazon Food has only sporadically looked at discounting, a key tool used by delivery companies to gain market share. At least one restaurant partner stated that they were not even aware of the 60% discount on their brand and that Amazon is paying for it out of pocket. This could mean the company hasn’t entirely given up on its grocery delivery dream in India yet.

For today’s discussion, Amazon’s entry into food delivery for the giant is nothing new.

The company has been involved in grocery deliveries and has closed stores outside of India at least twice.

It was always a late starter in these regions and struggled to develop a clear differentiator in order to gain market share.

US residence: Amazon launched Amazon Restaurants at its home base in Seattle in 2015. It was available for free to Prime members and promised to deliver in less than an hour.

To gain market share, the company tried various tactics, including introducing the Price Guarantee, which promised not to increase menu prices and even reimbursed customers for the difference if they discovered a higher price on Amazon’s service. After the aggressive ramp-up in the first few days, Amazon’s delivery schedules in the US weren’t much.

Four years later, when the company ceased its grocery delivery business in mid-2019, it had barely made a dent in the market. A few months before the closure was announced, Amazon’s market share was low.

DoorDash, Postmates, GrubHub and UberEats occupy over 90% of the grocery delivery market, according to a report by market research firm Edison Trends.

Amazon had said at the time that it was focused on grocery delivery, according to a New York Times report that now appears to be the focus even in India.

United Kingdom: When Amazon entered the UK grocery delivery business in 2016, the market was dominated by Deliveroo and UberEats. Interestingly, UberEats had entered the country just three months before Amazon. The service was only intended for Prime subscribers, according to The Verge, who could pay £ 1.99 to have food delivered from over 200 London restaurants within an hour.

Two years later – in 2018 – Amazon closed its UK grocery delivery business. It turned out it hadn’t given up the sector entirely.

Enter Deliveroo: Less than a year after Amazon restaurants closed in the UK, Amazon completed a $ 575 million financing round at Deliveroo. The deal got into trouble with regulators because of its potential anti-competitive effects.

In 2020, regulators approved Amazon’s minority purchase of 16% of the shares in Deliveroo. For a fleeting moment, it may have looked like the Deliveroo bet paid off well for Amazon as opposed to its own delivery intervals. After all, Deliveroo ranked third in the UK grocery delivery market in February 2021 with a 26% share.

A Deliveroo delivery driver cycles in London
But when Deliveroo is listed: Hailed as one of the UK’s biggest IPOs since 2011, Deliveroo stock turned out to be a nightmare for investors as it fell 26% below its market price on opening day and was close to £ 2 billion (US $ 2.8 billion). Dollars) from Deliveroo’s original market lost capitalization.

Deliveroo’s share price has rebounded somewhat following Delivery Hero’s recent investment in the company.

How is India different? India appears to be the only country where Amazon is actively pursuing its grocery delivery ambitions. While Swiggy and Zomato’s commissions are in the 15-30% range, some restaurant partners have negotiated a single-digit commission with Amazon.

Despite this enormous advantage, listing on Amazon Food is not the easiest, say restaurant partners who had to undergo strict hygiene audits before they were given the green light. These strict multi-point controls for restaurants on board have led to a restriction on the supply side.

There is also a feeling among restaurant owners that Amazon is not yet serious about its food delivery bets. A restaurant partner, who asked for anonymity, said that unlike Swiggy and Zomato, there is no assigned account manager who is in regular contact with restaurant owners.

“We hope they scale too,” said one grocery chain owner with a pan-India presence. “With their current user base in other Amazon offers, they are a good introduction to this area.”

Restaurant owners tired of huge discounts and high commissions are waiting for Amazon to come in with guns blazing.

Let’s move on to other big developments of the week

ETtech DEALS DIGEST

grocery store
Tata Digital‘s potential investment in Dunzo is stuck on a critical contour of the deal, where the Bengaluru-based startup does not want to give up majority control, sources told us. The hyperlocal company is also in active discussions with financial investors to raise between $ 100 million and $ 120 million with a valuation in the $ 500 million to $ 600 million range. Also, read our latest in-depth look at Tata Digital’s plan to integrate various online businesses and launch a super app.

■ Used car market Autos24 We are in final negotiations to complete a $ 300-350 million round of funding led by DST Global from existing financier Yuri Milner, along with the involvement of new investors such as Falcon Edge, Carlyle Group and SoftBank Vision Fund People who were aware of the matter. The company is likely valued at $ 2 billion after the financing, up from its valuation of over $ 1 billion last November.

post man surpassed BrowserStack as India’s Most Rated Software-as-a-Service (SaaS) startup this week after raising $ 225 million on a post-money valuation of $ 5.6 billion. The round was led by existing investor Insight Partners along with the involvement of new funders such as Coatue, Bond Capital and Battery Ventures. Headquartered in San Francisco and Bengaluru, the company was valued at $ 2 billion a year ago when it raised $ 150 million in funding led by Insight Partners.

SaaS unicorns
■ Business-to-Business (B2B) manufacturing platform Pleading has secured $ 150 million in Series E funding led by D1 Capital Partners, we were told by people who know about the development. With this capital increase, the company is valued at $ 1.5 billion, making it the latest startup to join the Indian startup unicorn club. Zetwerk was previously valued at around $ 600 million when it raised $ 120 million in capital in February this year, led by US-based Greenoaks Capital and Lightspeed Venture Partners.

■ Hundreds of seniors Paytm Executives are converting their employee stock options into stocks before the digital payments major launches one of India’s largest IPOs later this year. These stocks could be cumulative worth more than Rs 600 crore based on the latest review of the Noida based company, shared us with people who were aware. Read our latest in-depth look at the possibilities of a successful listing for Paytm.

Here’s a quick look at the top financing deals of the week

Offer overview
MORE GREAT STORIES FROM OUR REPORTERSFollow-up finance graph
More than one in five startup unicorns this year has raised funds to higher ratings since joining the $ 1 billion club. This is very different from the previous generation of unicorns, who took much longer to apply for their ratings-boosting banking companies. Meanwhile, RBI has rejected a request by the country’s payment gateways for exemptions from selected new regulatory norms designed to prohibit merchants from storing card data and to offer payment providers a one-click checkout service for consumers from January 2022.Bhavish Aggarwal
Aggarwal said the government had done its job of creating a local engineering and manufacturing ecosystem for automobiles and it was now up to industry to invest and make India a global hub for electric vehicle manufacturing The second Phase of the project, which is expected to connect 3.61 lakh villages by August 2023, saw increased interest from private sector actors due to increased digital adoption due to the ongoing pandemic and has conducted nearly 100 experiments with different types of work models, including a mix from virtual, outsourcing and in-office models.

That’s it for us this week. Stay safe and get the bump. 💉

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