Dive Brief:
- Amazon Restaurants, which provided Prime Members delivery from local restaurants, will end operations on June 24, according to GeekWire.
- At its peak, the service, which launched in Seattle in 2015, was in over 20 U.S. cities and London.
- Amazon will also end its office lunch delivery service Daily Dish on June 14.
Dive Insight:
Amazon's exit from the restaurant delivery segment isn't really a surprise, especially after it left the London market in December. The company has been facing a lot of competition in the U.S. from the likes of Grubhub, DoorDash, Uber Eats, Postmates and Waitr, all of which have been quickly expanding into new territories and gobbling up more market share.
The company was particularly popular in Seattle for a time, holding 21% of the market share in 2017, but was quickly surpassed by Uber Eats in its hometown, according to Recode. It also didn't gain enough of a foothold in larger metros, such as Chicago, where Grubhub is based, and San Francisco, where DoorDash and Uber are based. In those larger cities, it held just over 1% market share in 2017, according to Recode.
Amazon Restaurants also lacked the scale and footprint of its larger rivals, with Grubhub in over 2,200 cities. DoorDash quickly scaled into 50 states and more than 4,000 cities in the U.S. and Canada within the last six months, and Postmates reached into 3,500 cities and all U.S. states earlier this year. Technomic principal Melissa Wilson told Skift Table in 2018 that was a "blip on the radar" compared to sales growth of the top five companies during the first half of 2018.
The online retailer may have lost focus growing this segment following its $13.4 billion acquisition of Whole Foods. It has since been expanding its grocery delivery arm into more cities. Amazon's future in restaurant delivery may be in investing in large existing companies. It led a $575 million fund in May to invest in Deliveroo.
Mizhuo Restaurant and Proteins analyst Jeremy Scott wrote in a note to Restaurant Dive that the Deliveroo investment signals Amazon as a potential acquirer in this space, and that Grubhub could be an attractive target.
