Amazon India raises food delivery stakes with low restaurant commissions3 min read . Updated: 05 Sep 2019, 11:18 PM IST
- Amazon is signing up restaurants across the country as it seeks to start delivering food from next month
- Amazon recently invested in food delivery startup Deliveroo, signalling that it hasn’t given up on the business
Bengaluru/New Delhi: Amazon India, which is set to start its food delivery service next month, is promising restaurants its commissions will be a mere fourth of what rivals Swiggy and Zomato charge, a move set to spark a spell of intense competition in the business.
Amazon is signing up restaurants across the country as it seeks to start delivering food from October, first in Bengaluru, and followed by Mumbai and Delhi, according to three people aware of the development.
Amazon is also in the final stages of acquiring Foodpanda’s infrastructure from Ola, said one of the people cited above.
“They were talking to multiple players, but the Foodpanda deal is almost done," said this person, requesting anonymity. “Since Amazon is going the marketplace route for now, it is acquiring the remainder of Foodpanda’s infrastructure which includes restaurant connections and integration, the menus, order processing methodology, delivery executives, etc."
For its food business, Amazon is expected to utilize the infrastructure and riders hired to deliver groceries and other items as part of its Prime Now service.
The company is signing up restaurants at a commission of 5-6%, a fraction of the 20% or so charged by Swiggy and Zomato.
“They are talking about super aggressive commissions to begin with, and looking at sub 10%. But I am sure they will increase with time. They should ideally be live in next 30 days," said the owner of a large restaurant chain, who is in talks with Amazon, requesting anonymity.
The entry of Amazon into the food delivery business has enthused restaurant chains, who expect the new platform to give them additional leverage while negotiating terms with Zomato and Swiggy, which dominate the market now, according to executives in at least half a dozen restaurant chains. Restaurants have been at loggerheads with Zomato and Swiggy over restrictive terms, high charges for listing on their platforms and consequent lower profits.
“Amazon’s entry into the food aggregation space will give us a leverage on commissions," said an e-commerce head at a large fast food chain that’s in talks with Amazon. “Between Swiggy and Zomato there is a third partner you can now operate with and explore, so suddenly the benchmark for commissions won’t be 18-24%, but something much lower," the person said on the condition of anonymity.
Amazon is also signing up several popular food chains.
Globally, Amazon launched its restaurant delivery business in 2015. It was shut down in June this year. However, Amazon recently invested in London-based food delivery start-up Deliveroo, signalling that it hasn’t given up on the business.
“We do not comment on speculation about what we may or may not do in future," an Amazon spokesperson said in an e-mail response to Mint.
A spokesperson for Foodpanda said: “Over the past year, we have built Ola’s food business ground up, creating a range of owned food brands through our vast network of kitchens. These brands are now being made available on leading platforms and we continue to partner with more marketplaces, delivery services, as well as prominent food brands, to further expand our offerings."
While it is not entirely clear under what model Amazon will operate, restaurants Mint spoke to said the company is exploring both a facilitation model by directing orders throught its platform to the restaurant partner, as well as providing a delivery fleet.
“Today they have both models—i.e a pure order generation platform and another where they can fulfil the order as well," said the restaurant chain head cited above. “At the moment they are not pushing for one model but both models," he added.
That said, several industry insiders Mint spoke to said Swiggy and Zomato, which clock more than 1 million orders daily, are not worried about Amazon’s foray.
“Swiggy is focused on how to diversify the use of its fleet, while Zomato wants to get into every kind of food-related activity," said one of the people cited above.
Some restaurants, however, are cautious about signing up with Amazon. The digital head of a large restaurant chain, speaking to Mint on the condition of anonymity, said his firm is seeking clarity regarding refunds and complaint resolution before signing on. “We are waiting to hear from Amazon on these issues also, which is why we are holding back from listing on Amazon for now," the person said.
The Economic Times had reported last month that Amazon is offering competitive commissions to restaurants at 6-7%. The Times of India had reported that Amazon will foray into food through its Prime Now offering.
Salman S.H. in Bengaluru contributed to this story.