Why is Amazon investing in Deliveroo?
For a company used to dominating every market it enters, it is surprising that Amazon Restaurants badly trails the other third-party delivery platforms in the United States. In fact, based on the latest delivery volume figures for March 2019, Grubhub had 32% of the market, Doordash 30%, Uber Eats 21%, Postmates around 10% and Amazon Restaurants around 2% . That is even more staggering given the financial resources of Amazon and its enormous expertise in the logistics of delivery.
Many people probably didn't even know that Amazon offered a restaurant delivery service. Amazon's strategy is certainly not obvious. The service is only available in limited areas and only available to Amazon Prime customers, that is customers who pay a yearly subscription for Prime membership and get a range of benefits in return. The restaurant service operates in a similar fashion to all the other big players in the industry.
Now for the confusing part, aside from the fact that the service is tiny compared to its competitors. First, it is still being rolled out slowly in the United States, but at the same time, in the United Kingdom market, Amazon closed down Amazon Restaurants UK six months ago. In a less than insightful statement Amazon simply announced, “We are closing Amazon Restaurants UK. We would like to thank all of our customers and merchants, and delivery partners for their support.”
Now add in another twist. It was a revealed this week that Amazon is one of the lead investors in Deliveroo. Deliveroo is a similar company to DoorDash and Uber Eats but does not operate in the US. Amazon lead a $575 million funding round in the UK-based food delivery company Deliveroo. In a press release Deliveroo said it would use the money to expand its UK engineering team, expand its delivery reach, and continue to develop new products such as its delivery-only kitchens. Deliveroo currently operates in 500 towns and cities across 14 countries and territories.
The investment will intensify Amazon’s competition with rival tech company Uber and its Uber Eats service. Maybe the strategy is not so confusing after all. If you can't beat them, buy them!