The tech giant's restaurant business arm hasn't grown very much, perhaps by design, but an acquisition or two can change that.
— Danni Santana
Amazon recently ended its food delivery service in the UK, but in its two years of existence the tech giant never grew the business to the levels of market rivals Deliveroo and Uber Eats.
The same rings true when analysts observe Amazon’s U.S. delivery arm, launched in 2015, which remains unaffected by the company’s decision that went into effect Dec. 3.
According to Chicago-based researcher Technomic, Amazon Restaurants is currently available in 25 U.S. cities. And while each service describes a market differently, by contrast Grubhub is available in more than 1,600 locations. Even one of the industry’s smaller players, EatStreet, delivers to diners in 250-plus U.S. cities today, according to its website.
From a revenue standpoint, the top five delivery companies in the country — GrubHub, Uber Eats, DoorDash, Postmates, and Caviar — experienced a combined 50 percent sales growth over the first two quarters of 2018, led by Uber Eats and its exclusive McDonald’s partnership. By comparison, Amazon Restaurants was “a blip on the radar,” said Melissa Wilson, principal at the research and consulting firm.
“We’ve observed with Amazon Restaurants that compared to other providers, they’ve been very slow in their approach to grow,” Wilson added, while noting that two factors behind this could be the onboarding of Whole Foods, which Amazon acquired in 2017, as well as the elongated search for its second headquarters.
Amazon did not respond to requests for comment from Skift Table, but in a statement regarding the ending of its UK delivery business told The Verge, “We are closing Amazon Restaurants UK. We would like to thank all of our customers and merchants, and delivery partners for their support.”
The Future of Amazon Restaurants UK
Despite its exit from the UK, Amazon is reportedly interested in purchasing Deliveroo, and has approached the company on multiple occasions, Business Insider reported in September. Last year, Deliveroo raised $482 million in venture capital funding. It is currently pursuing another round that would raise its valuation to $4 billion.
It’s a strategy that has become more common in the delivery space, which is ripe for consolidation, according to Wilson. Two examples include Landry’s Restaurant’s acquisition of Waitr in May for $308 million, as well as delivery company Bitesquad frequently buying up smaller independent competitors in select markets.
“Don’t rule Amazon out,” said Wilson. “It’s possible they could have been testing the waters, seen the strong penetration of competitors, and decided to lay back for now.”