I ordered food to be delivered for the first — and last — time recently through Amazon Restaurants, the 4-year-old service that will be shutting down for good on Monday.
When the driver handed me my lunch order, I asked what he thought of Amazon Restaurants going away and what he might do now. The man shrugged and mumbled something about Uber. And he left saying he had to get back to work.
The response was similar from restaurant workers and at least one financial analyst GeekWire interviewed — they sort of shrugged, and said the work will go on. And it will go on at the hands of companies who demonstrated a considerable dominance over the tech giant in the effort to get restaurant food delivered to waiting consumers.
Amazon Restaurants was available — to Prime members only — in 20 cities across the U.S. The service first launched in Seattle back in 2015. After shutting down in London this past December, Amazon made the surprising decision to pull the plug entirely, as GeekWire first reported earlier this month.
The closure of Amazon Restaurants after investing serious time and money in the service is a rare retreat from the e-commerce behemoth.
But Amazon faced fierce competition. Uber Eats, Grubhub, DoorDash and Postmates control 93 percent of the market share, according to Forbes. Uber Eats is in more than 500 cities, Grubhub is in 2,200 and Postmates operates in 3,500.
After browsing the options for which Amazon Restaurants partners would deliver to my zip code north of downtown Seattle, I settled on Mexican fare from Senor Moose Cafe in the Ballard neighborhood. From mouse click to fork dip, the process took about 44 minutes on a Tuesday at lunchtime.
After eating, I decided to visit the restaurant, where I found Erik Simon behind the counter. A floor manager at Senor Moose, Simon has worked at the restaurant for 10 years. He said they just started using Amazon Restaurants about a month ago and that everything was going great. They were getting a handful of orders per shift.
On a small shelf near the kitchen, among empty plates and utensils, a few tablets were positioned. It’s a common sight now in many restaurants that deal with third-party delivery services, and some I visited had six or eight plugged in and running behind counters and near kitchens.
But even though he was pleased with how things were going in the short-lived time Senor Moose partnered with Amazon, Simon said it wouldn’t have been his first choice for a delivery service.
“Uber is definitely what I would recommend personally and for businesses,” he said. “They have the fastest response and fastest pickups.”
In its S1 filing before going public last month, Uber reported that Uber Eats, which launched in 2014, had more than 220,000 restaurant partners in 36 countries as of Q4 2018. Of the 91 million monthly active platform consumers on the ride-hailing service, more than 15 million received a meal using Uber Eats in Q4.
On the company’s earnings call last month, Uber CEO Dara Khosrowshahi called food delivery “a huge category” and said it could eventually be larger than the ride-hailing business.
“We believe that Uber Eats has grown to be the largest meal delivery platform in the world outside of China based on gross bookings,” Uber wrote in its IPO filing. “We believe that our scale enables the average delivery time for Uber Eats to be faster than the average delivery time for our competitors.”
It’s a sentiment backed up in some small way by stats provided by another restaurant worker in Seattle.
Donal Pitt is a manager at the Fremont location of the small chain Blue Moon Burgers, where he has worked for almost four years. The restaurant is located in the heart of the busy neighborhood that is home to Tableau, Google and Adobe offices.
Blue Moon has been using Amazon Restaurants for about three years, in Fremont and at locations in Capitol Hill and West Seattle. They also use Grubhub and Uber Eats and they run a tablet for their own pickup orders, Pitt said.
Pitt said Blue Moon was getting one or two orders through Amazon every two or three days; he noted 22 orders in the past month.
By comparison, Blue Moon in Fremont gets eight to 12 orders a day through Uber Eats. Counting out loud, Pitt stopped after five days and 34 orders. He thinks the Amazon Restaurants shutdown will just mean more business for competitors, however small the share.
“I think that Amazon tried to jump in behind Uber Eats, and the publicity for Uber Eats was so vast that people didn’t really catch on with Amazon,” he said. “I believe it was a promotional thing with [Amazon] or however you want to call it.”
Despite Amazon’s lack of market share, Tom White, a senior analyst with D.A. Davidson, was still surprised that the company pulled out of the meal delivery fight, especially in light of its big investment just a month earlier in U.K.-based delivery company Deliveroo.
“I will say that I’m not convinced that Amazon has given up on it for good,” White said. “I wouldn’t be surprised if they come back to this category at some point. I think it’s too complimentary to the assets that they’re building out when it comes to last-mile delivery and building out their own logistics network.”
In a story in AdWeek, Bryan Eisenberg, co-founder of the agency BuyerLegends and co-author of the book “Be Like Amazon,” said he doesn’t see the shutdown as a failure.
“At the end of the day, they win by having data,” Eisenberg said. “The question is did they get enough data to know what they need to do next? My suspicion is they are not giving up on the model of food delivery. The question is what’s the next step to doing it right.”
White referenced the competitive intensity in the food delivery category and said it’s not exactly a “rationally behaving” marketplace at the moment.
- Uber Eats generated $1.46 billion in revenue last year, up from $587 million in 2017, and brought in $536 million during the first quarter of 2019.
- Grubhub, saw revenues reach $324 million for the first quarter, up 39 percent year-over-year.
- DoorDash raised $600 million last month, and is now valued at $12.6 billion.
The fact that Amazon was only in a handful of markets means that its departure won’t produce a significant boon for those remaining players, though it did help ease some investor concerns — Grubhub’s stock is up 10 percent since GeekWire’s initial report of Amazon Restaurants closing.
But if Amazon does return, it might actually benefit from what’s been built and find new ways to attract gig workers, White said.
“Uber and DoorDash and these other guys have basically created this entire new class of worker, this gig-economy driver who’s now online, they’ve secured a car, they’re there for hire and available,” he said. “And drivers aren’t particularly loyal to one platform or another. They sort of go where they can get the best terms or where they can be utilized at the highest rate. So Amazon can still benefit from these other companies effectively bringing on this capacity of drivers.
“I can imagine a lot of different ways that Amazon could, if they wanted to get aggressive, construct ways for drivers to potentially show some loyalty to Amazon,” White added, speculating on how the company might offer benefits or “Amazon points” that drivers could use toward other Amazon goods and services.
Amazon declined to elaborate on the closure of Amazon Restaurants beyond its original statement earlier this month. Amazon also shut down Daily Dish, a workplace lunch delivery service that launched in 2016, on June 14.
“As of June 24th, we will discontinue the Amazon Restaurants business in the US,” an Amazon spokesperson said in the statement. “Many of the small number of employees affected by this decision have already found new roles at Amazon, and others will be provided personalized support to find a new role within, or outside of, the company.”
In the meantime, the company will remain focused on moving food in other ways. It still delivers groceries from Whole Foods via Prime Now in more than 80 U.S. markets. And just this month it invested further in its original grocery service, AmazonFresh, which operates in 15 metro areas.