Amazon will likely put the fear of God into other delivery services. But at some point everyone will have to deal with the fact that there's only so much profit that can be squeezed from bringing a lukewarm burger or bowl of pasta to your door.
— Jason Clampet
Amazon.com Inc. may soon bring Shake Shack burgers and Chipotle burritos to your door as it moves to expand in the growing market for restaurant delivery.
The e-commerce titan has been working to crack the code on food delivery for at least a decade. Now that Amazon has a major toehold in the grocery industry following its $13.7 billion acquisition of Whole Foods Market, it’s trying to muscle into the restaurant business.
Amazon has teamed up with a company called Olo, which provides digital order and pay technology to 200 restaurant brands with about 40,000 U.S. locations, potentially giving Amazon access to a slew of delivery orders. Buca di Beppo, which runs about 90 Italian eateries, is the only Olo customer so far to publicly say it will use Amazon Restaurants.
The $1.5 trillion U.S. food market is split roughly between groceries and restaurants. Food deliveries appeal to Amazon because of the frequency of orders, putting it in constant contact with shoppers and helping it collect valuable data about their preferences even if they don’t make much, if any, money on individual transactions.
Amazon began a one-hour restaurant delivery service in Seattle in 2015 and has been expanding it to other cities around the country. The service appeals largely to mom and pop shops that can benefit from exposure to Amazon customers and its delivery expertise, but it hasn’t attracted many chains.
The deal with New York-based Olo, which counts Shake Shack Inc. founder Danny Meyer as an investor, could bring fast-food restaurants like Chipotle, Five Guys and Wingstop to the Amazon Restaurants delivery service. Olo provides the technology platform to publish menus and take orders while Amazon arranges the deliveries.
Olo launched a new product called Rails that makes it easier for restaurants to take delivery orders from Amazon and other third-party services, according to Noah Glass, the company’s chief executive officer.
“They’re obviously looking at new business segments — this is a big market for Amazon to get access to,” Glass said in an interview.
The deal with Amazon gives Olo customers the option to start offering delivery, an increasingly important service as the restaurant industry grapples with slowing growth. The market for fast-food delivery orders placed through mobile apps was about $10 billion in 2016 and is expected to surpass $35 billion by 2020, according to research from Cowen.
McDonald’s Corp., after resisting calls to offer delivery for many years, recently teamed up with UberEats in the U.S. and the service is now available at about 3,500 locations.
Olo helped build Shake Shack’s mobile order and pay app, and it also developed the technology for Chipotle’s catering service. As more people look to order food online, Glass thinks Olo’s clients will increasingly sign up to use Amazon Restaurants.
“This gives them easy access to Amazon,” he said. “A big chunk of business is shifting to those who are good at this.”
©2017 Bloomberg L.P.
This article was written by Spencer Soper and Craig Giammona from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].