A major player has entered the ongoing food delivery wars: Amazon announced late yesterday it would be expanding its Prime Now-based restaurant delivery into 20 major metropolitan areas across the U.S. Tech Crunch notes the service went live in parts of Los Angeles this week.
Amazon first tested its restaurant food delivery service in Seattle this past August. By September, the retail giant secured partnerships with several restaurants in the Seattle area to bring lunch and dinner to citizens in certain parts of the Emerald City. The service works through Amazon's Prime Now application, which offers free two-hour delivery and 1-hour delivery for $7.99. According to Tech Crunch, Amazon plans to bring its restaurant delivery service to all of the markets Prime Now currently services, which includes Atlanta, Austin, Baltimore, Chicago, Dallas, Houston, Indianapolis, Las Vegas, L.A., and the cities in Orange Country, New York, Miami, Minneapolis and St. Paul, Phoenix, Portland, Sacramento, San Antonio, San Francisco, and Seattle.
Food delivery is just another perk for Amazon Prime members
The interesting part of this new project is that Amazon is not simply offering this service to compete with existing delivery services — though its marketing muscle, well-established infrastructure, technological prowess, and massive user base mean it cannot avoid being among the competition. The service is being framed as another perk for users of Amazon Prime. Amazon charges Prime users $99 per year for the service, so in order to keep those customers paying year after year it has been adding various perks each year including free e-books, free music streaming, and free TV shows and movies.
Amazon's Prime Now restaurant delivery is free for now, and menu prices are not inflated to help cover the cost, but at some point Tech Crunch writes the company will start charging for the service. Apparently, Amazon makes a small profit from the service via a revenue share model with restaurants that use it, though it has not disclosed its take from each sale. According to a company representative, Amazon sees restaurant food delivery as a viable growth sector for 2016. When asked if Amazon is serious about getting into restaurant delivery, publicist Tom Cook said, "Yes. Since September we've launched restaurant delivery on Prime Now in Seattle, Portland, and now Los Angeles. We are constantly looking at ways to add value to Prime and restaurant delivery is another great service for Prime customers."
So should Caviar, Seamless, Grubhub, UberEats, Eat24, and Postmates be worried? The companies are sure to be watching Amazon's every move right now. Existing Prime customers are likely to try the service as it hits each metro area if only because it's still a free perk. But will Amazon be able to compete with the delivery marketshare of Seamless, the exclusivity of offerings on Caviar, the sneaky Postmates model, or the popularity of Uber? It's too soon to tell. For its LA launch, Amazon is offering delivery from "dozens" of restaurants in several zip codes and a few grocery markets.
An Amazon representative explained that the company is not releasing a full list of restaurants available on the application in Los Angeles because the offerings vary by zip code, but in the Westwood neighborhood of LA, where UCLA students might have student Prime memberships, there are at least 30 options for tacos, pizza, churros, Thai, and sushi. Amazon has even partnered with a more elevated dining option Fundamental LA, showing a commitment to expanding not only the variety but the breadth of meal offerings available for delivery.
Update 11/11; 12:08 p.m.: An earlier version of this post stated Amazon's LA restaurant offerings were limited to five restaurants; in fact, the retail giant has partnered with "dozens" of restaurants in various zip codes across LA, according to a company representative.