It wouldn't be a typical week if Amazon wasn't making some type of bold competitive move or another. Its latest sets up a new battleground for Amazon and third-party restaurant delivery companies such as GrubHub and Postmates, as TechCrunch reports:
Amazon is ramping up the competition with other restaurant delivery services starting today by announcing that it will not mark up the menu prices of the items it offers on-demand via Prime Now Restaurant Delivery, and it will, in fact, refund customers the difference if they discover a higher price on Amazon’s service within 24 hours of placing their order. This “Price Guarantee” will roll out to all eight markets where Amazon’s restaurant delivery is available, starting with its newest city, also announced today: San Francisco.
Customers can place orders using the Prime Now app, then take free, 1-hour delivery from any of the featured restaurants.
Of course, without marking up the menu items it delivers, it’s not likely that Amazon’s latest on-demand service is turning a profit at this time. Instead, it’s just another perk that Amazon offers its Prime members. And it can afford to take a loss while scaling its food delivery service, which isn’t core to Amazon’s overall business. (Amazon does a rev share with its restaurant partners, and it won’t promise that it will be free from delivery fees indefinitely.)
Analysis: For Amazon, It's About An Education, Not Just Food
Amazon's aggressive entry into restaurant delivery speaks once again to the rising power of consumers, says Constellation Research VP and principal analyst Guy-Frederic Courtin. "One can argue that restaurant delivery has been around forever, but what's interesting is that now we're putting large e-commerce and fulfillment companies on that path as well," he says. "It also reinforces the notion of last-mile fulfillment and how important it has become."
Meanwhile, delivering restaurant meals is a much different kettle of fish than bringing a box of groceries to someone's house, after all. There are huge considerations in play with regard to customer experience, such as timeliness—nobody likes a congealed pizza—and food safety. For example, did your delivery sushi sit in a hot car too long on a summer day?
These challenges in turn raise others for the restaurants who contract with third-party delivery services. In doing so, they're offering customers more choices, but at the same time are handing off partial control of their brand and image to another company. Customers who have a subpar restaurant delivery experience through Amazon or its competitors may well blame the restaurant more than the delivery provider, Courtin says.
As the TechCrunch report notes, Amazon may not be making a dime of profit from the delivery service. But the challenges involved in making it successful and pleasing to customers could speak to another motive, Courtin says. "The fact may be that Amazon is dipping into this market not because it wants to deliver food, but rather as a testing ground to help figure out how they can deliver everything. Think about how much they can apply to all the other things they do."
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