Amazon to Join the Food Delivery Business – How is it Going to Re-shape the Market?

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Amazon, the global leading retailer, now plans to make inroads into the food delivery business
in India. Initially, this launch was scheduled during Diwali 2019 but got shelved for reasons not
revealed by Amazon. Amazon had planned this launch in March 2020 on Amazon Prime Now
App. (Source: Economic Times). However, the launch has currently been stalled due to the
COVID-19 pandemic.

But once normalcy returns, we can expect Amazon to go ahead with its plans.

Amazon, move to venture into the food delivery business in India was probably prompted by
the step taken by its chief rival in India, Flipkart to foray into food retail business. Flipkart has
registered an entity called “Flipkart Farmer Mart Pvt. Ltd., which strives to boost the agriculture
and food processing industry in India.

Two of the biggest names in the food delivery business in India currently are Zomato and
Swiggy. UberEats had tried to penetrate this market but was unsuccessful and was taken over by
Zomato.

Before we look at the prospects before Amazon and how Amazon impacts the market, let us
see how Swiggy and Zomato are currently placed:

● Both Swiggy and Zomato have a large client base in India. They have together raised profits to
the tune of $ 2 billion. (Source: TechCrunch). However, the reality that, they have also lost $15
million monthly towards their efforts to acquire new customers and retain existing ones can’t
be overlooked.

● It is due to these losses that they have diversified into other fields. Swiggy claims to be one of
the biggest cloud kitchens in India, besides it has also expanded its delivery to any item, not
just-food. Zomato is working on “Project Kisan” where it procures raw material directly from
farmers and fishermen and delivers to restaurants.

● The business model of both Swiggy and Zomato focuses on offering food at subsidized rates to
their customers. But this model has not been taken very kindly by restaurant owners across
India. Restaurants across India are also irked about the high commission they are required to
pay Zomato and Swiggy.

● As per Economic Times, Swiggy and Zomato are trying to reduce their losses by tightening
their cost structures and reducing discounts offered. How these strategies fare, only time will
tell!

● Zomato is also facing other issues. For one, nearly 1/3rd of its partner restaurants are opting
out of its Gold program. The reason is that Zomato was supposed to make the Gold program
available to only select clients, but it went ahead and offered it to everyone.

Well! As is evident, things sure look tough for Zomato and Swiggy!

Does this mean that the signs look positive for Amazon?

Amazon is a big name and has tasted success in diverse fields globally. Whether it is providing
Cloud hosting services, e-commerce, etc., Amazon is definitely a name to reckon with!

They sure know the nitty-gritty of the business. They have been successful in India as well. They
started with retail business in India and soon became No.1 retailers in the Indian market. Soon
they offered grocery delivery services in the Indian market. And, this was also accepted
wholeheartedly by the Indian consumers. In other words, Amazon has already become a
household name in India. Besides, Amazon has a well set-up logistics network to facilitate the
food delivery business in India.

Although Amazon has these aspects in its favor, it is not taking things for granted. Amazon is
planning an aggressive launch if the details available are anything to go by.

Some groundwork done by Amazon in this direction is:

● According to Economic Times, Amazon has already done pilot testing with few restaurant
partners in Bengaluru in areas such as HSR Layout, Whitefield, Bellandur, Haralur, and
Marathahalli. However, the platform is only available to the employees of Amazon currently.

● Additionally, Prione Business Services, a joint venture between Infosys co-founder NR
Narayana Murthy’s Catamaran Ventures and Amazon India, has been signing contracts with
restaurants to list on Amazon offering 10-15% commissions. This is about half of what Swiggy
and Zomato charge their partner restaurants.

These facts seem to indicate that the timing might just be right for Amazon to set foot in the
food delivery market in India.

However, it may not be very easy for Amazon to scale the food delivery market in the presence
of the Zomato and Swiggy. This is because of the fact that, Swiggy alone partners with over
160,000 restaurants in 520 cities in India. Also, Swiggy adds about 10,000 new partners each
month to its platform. (Source: TechCrunch)

But, let us not forget the fact that we are not discussing a regular run-of-the-mill company, we
are talking Amazon- A company that has a reputation for disrupting established businesses in
different fields!

If we take the example of e-commerce, we are all witness to how big names such as Shopclues,
Snapdeal, Mantra, and Jabong suffered major setbacks ever since Amazon ventured into this
field.

Why has Amazon been so successful in diverse fields?

Fearless Attitude

Amazon started off as an online bookstore, but now it has tasted success in various types of
businesses. This is because of their fearless attitude of venturing into any type of business.

Aggressive Approach

What sets Amazon apart is the fact that whenever they venture into a new business, they go
aggressively into it with an approach-“In it to Win it!”

Focus on Customer Satisfaction

It is a well-established fact that customer satisfaction is the key to success for any business. And,
the focus of Amazon is on its customers rather than its competitors.

Innovation

Amazon has become a market leader in every business that it has set foot in with constant
innovation to create new products and offer services aligned with the needs of their customers.

A dynamic company like Amazon sure has several positives under its belt! How it proves to be a
game-changer in the food delivery business in India will be interesting to watch!

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