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Last Updated : May 21, 2020 03:58 PM IST | Source: Moneycontrol.com

Amazon starts food delivery, picks Bengaluru for launch

The entry of Amazon Food could have massive implications for Swiggy and Zomato.


Amazon is all set to launch its food-delivery business in India, throwing a challenge to homegrown players Swiggy and Zomato who are already reeling from coronavirus fallout.

The ecommerce major will launch Amazon Food at select pin codes of Bengaluru.

“We are launching Amazon Food in select Bangalore pin codes, allowing customers to order from handpicked local restaurants and cloud kitchens that pass our high hygiene certification bar,” an Amazon India spokesperson said on May 21, responding to Moneycontrol’s queries.

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At a time when the entire food delivery sector is facing severe challenges, both in demand from customers and supply from restaurants, the entry of Amazon will test Swiggy and Zomato.

The two startups have cut jobs and scaled down their cloud-kitchen operations with the coronavirus outbreak changing the way people order food and also eat out.

Amazon Food will also give the company an edge over Walmart-owned Flipkart, its biggest rival in the ecommerce space.

Amazon has been conducting tests and checks with restaurants for quite some time in Bengaluru, founder of a cloud kitchen startup told Moneycontrol.

It started the pilot project in Whitefield, where a major chunk of the IT companies are located. It will now expand operations to central Bengaluru, he said.

“They were looking for very high-quality food joints to serve their customers. Cloud kitchens and restaurants had to match their standards of hygiene and processes to be selected,” he added.

In terms of an initial sense around the margins charged by Amazon, sources said, they were in the range of 15 percent.

This will put pressure on Swiggy and Zomato who have been trying to increase the commissions on their restaurant partners.

The Indian companies would in some cases charge as high as 30 percent.

With food delivery, industry insiders point out that Amazon has almost become a super app in India.

After starting out with basic ecommerce, it now has all forms of payments, insurance, fresh products, vegetables, staples and now even food delivery. The only sector left untouched is travel.

The buzz around Amazon’s entry into the Indian food delivery market has been on since the beginning of the year. However, industry experts thought given the current situation, the launch could be delayed.

This move in the middle of a pandemic shows that Amazon will push harder into India and try to cater to all consumption requirements of Indians, from apparel, digital payments, groceries, vegetables to now even cooked food.

“Customers have been telling us for some time that they would like to order prepared meals on Amazon in addition to shopping for all other essentials. This is particularly relevant in present times as they stay home safe,” the spokesperson added.

The Indian food delivery sector has been characterised by massive burns and an elusive profitable business model.

Even a company liked Uber struggled and ended up selling its India Uber Eats business to Zomato in January 2020.

With another American tech giant, with deep pockets, foraying into the space, consumers could be in for more discounts and price cuts.

But the restaurant industry is wary of working with food delivery platforms.

In a recent move, the National Restaurant Association of India said it was tying up with Dotpe, a software service startup, to bring all member restaurants onto a tech platform for home deliveries and a digital-dining experience. The aim is to keep food aggregators out.

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First Published on May 21, 2020 03:02 pm
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