Global ecommerce major Amazon is reportedly betting on competitive partner/service fees to make its space in the India’s food delivery market, which is majorly dominated by two Indian unicorns, Zomato and Swiggy.
According to a media report which cited an Amazon executive, the company is asking the restaurants for a mere 6-7% commission on its food delivery services, as compared to the 15-17% commission charged by the existing players.
“The ecommerce behemoth is actively pitching to break exclusivity contracts restaurants have signed with food aggregators,” he reportedly added.
Amazon is said to be planning the launch of its food delivery vertical in October, starting with Bengaluru. The service might be launched by the name of ‘Amazon Restaurant’, accessible through Amazon’s grocery delivery app Prime Now, the report noted.
Further, Amazon is said to soon start delivery of medicines and beauty products too, the report added.
Just yesterday, Amazon was said to be eyeing a partnership with Ola’s food delivery arm Foodpanda, which could be extended into an acquisition. Prior to this, the ecommerce company had also been reported to be in acquisition talks with Uber Eats.
As of April 2018, Amazon India had 67 fulfilment centres across 13 Indian states. On top of it, the company’s processing units are said to be spread across 19 Indian states and employs thousands of people, a testimony to the company’s vast delivery network across India.
Amazon has reported a 17% growth in net sales reaching $59.7 Bn in the first quarter of FY19, compared with $51 Bn in first quarter 2018. The company’s operating income increased to $4.4 Bn in theQ1 2019, compared with operating income of $1.9 Bn in Q1 2018.
Food Delivery Market In India
In January 2019 updates, RedSeer had released a FoodTech Leadership Index (FLI) which ranked Swiggy at the top place in the sector with a total score of 96 in the fourth quarter of 2018. While Zomato came in second with a score of 82. Meanwhile smaller players UberEats and Ola’s Foodpanda came in third and fourth respectively.
While Swiggy claims to have over 2 Lakh delivery partners and more than 1 Lakh restaurant partners spread across 200+ Indian cities. Zomato too claims to have a presence in 500 cities, and have onboarded 1.5 lakh restaurant partners and a delivery fleet of 2.3 lakh partners.
According to RedSeer’s Foodtech Market Updates, the foodtech industry has seen an overall GMV growth of close to 140% in 2018, with order volumes increasing by a whopping 176%.
However, the food delivery companies have recently been facing troubles from the restaurants associations, who have alleged them of high discounts, commission burden and GST tax burden, among other claims.
Earlier this week, the Federation of Hotel & Restaurant Associations of India (FHRAI) has warned of a nationwide protest against apps such as Zomato and Dineout, over the issue of heavy customer discounts.
Prior to this, another industry body National Restaurant Association of India (NRAI) had also initiated a #LogOut campaign against food service aggregators (FSA) such as Zomato, Dineout, Nearby, Magicpin and EasyDiner.