Is Amazon's food delivery business still half-baked?

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It has been more than a year since Amazon first announced its foray into the sector, starting with a pilot in limited areas in Bengaluru in May 2020. Very little has moved ahead.

Is Amazon's food delivery business still half-baked?
"Amazon has been around in food delivery for one year, but we have so far not seen any impact on our market share," Zomato co-founder Gaurav Gupta said during the company's press conference to announce its $1.25 billion IPO earlier this month.
This statement stood out starkly as the food-tech player, which is among the first tech unicorns in the country to list in India, was asked about competition in the space.
Even in its draft red herring prospectus, Zomato has skipped any mention of Amazon, only mentioning Swiggy, cloud kitchens such as Rebel Foods and branded food services players (including quick-service restaurants like Dominos, McDonald's and Pizza Hut, among others) as competition.
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This, despite Amazon's reputation of disrupting new sectors and markets by pumping in capital and offering highly competitive prices.
But Zomato may hardly be misplaced in not taking Amazon seriously in its food delivery ambitions in India, which has remained a single city-specific project since its launch. It has been more than a year since Amazon first announced its foray into the sector, starting with a pilot in limited areas in Bengaluru in May 2020. Very little has moved ahead.
In March this year, Amazon announced that it had expanded Amazon Food's presence to 62 pin codes in Bengaluru, and had said it had onboarded 2,500 restaurants and cloud kitchens in the city. Prime members get free delivery on all their orders, while other customers can pay a nominal delivery fee of Rs 19, the company said.
But the food delivery service has hardly received top billing on Amazon's smartphone app, and the sole order placed by this correspondent through Amazon Food for a dessert was cancelled within minutes despite the payment being processed. The amount was refunded, but the craving for something sweet had gone slightly sour.
SOUR START FOR RESTAURANTS DESPITE LOWER COMMISSION CUTS
For restaurants, Amazon's entry into the food-tech space dominated by Swiggy and Zomato meant good news, since they would get more competitive rates from the platform and a bigger distribution channel.
Amazon charges restaurants a much lower commission of 10-12 percent on orders, compared to the over 20 percent commission charged by Swiggy and Zomato, an issue that has been a pain point for restaurants for years. In fact, the National Restaurant Association of India (NRAI) had even approached the Competition Commission of India against several business practices by Swiggy and Zomato, which includes high commission charges and deep discounting.
But despite a lower commission and free packaging offered by Amazon, some restaurants have been reluctant to partner with the company, and among those who have, many are unhappy.
CANCELLATIONS AND DELAYS
"Amazon doesn't seem serious about this business," says Dinesh Surekha, a franchise owner of Kapoor's Cafe, a popular North-Indian food chain, which has seven outlets in the city.
"We onboarded two of our branches on Amazon Food in November 2020, but since the very first order, our experience has been poor. There is no delivery-partner tracking, deliveries are often delayed, and many of the orders are abruptly cancelled despite us keeping the food ready," Surekha said.
Despite it being over seven months, Surekha says the restaurant gets one or two orders a week through Amazon Food, compared to the hundreds they deliver through Swiggy and Zomato on a daily basis.
It's a similar story among other restaurants as well, both bigger and smaller chains. The Empire Hotel chain has signed up four of its 24 branches on Amazon Foods a year ago, but the daily orders through the platform are less than half a percent of orders they see through Swiggy and Zomato.
Shakir Haq, CEO, NKP Empire Ventures, did not want to share specific numbers but added, "We signed up with Amazon over a year ago, but the pace has not picked up at all, and there has also been no communication from their end for the past several months."
Haq also alluded to seeing a lot of cancellations of orders that we do receive from Amazon.
Abrupt cancellations and delays in deliveries have taken away the sheen of a lower commission for restaurants that Amazon offers.
"A dosa that a customer had ordered was lying on the table for over 40 minutes before an Amazon delivery executive picked it up," said AL Rakesh, who runs an eatery called Priyadarshini Grand in Bengaluru's Basaveshwaranagar.
"We were very eager to sign up with Amazon, and we thought we could get a lot of promotion through their channel, but we are seeing many customer complaints on our deliveries through Amazon," he added. The restaurant sees about 5-10 orders a day coming through Amazon Food, compared to 150-200 a day through Swiggy and Zomato.
STRICT ONBOARDING CRITERIA, POOR COMMUNICATION
A common point raised by several restaurant owners and managers that CNBC-TV18 spoke to was about the stringent check-list by Amazon for on-boarding restaurants, as many as 120 on the check-list.
"They are asking for certifications over and above what we have under FSSAI," said Arpit Kapoor, owner of Kapoor's Cafe, "They wanted regular water testing reports of the RO plant of the building we operate in even though we run out of only a couple of floors. They had a checklist of 120 points, and we decided not to onboard our branches with them, except the two being run by a franchise owner," Kapoor said.
Subramanaya Holla, vice-president, Bruhat Bangalore Hotels Association, and owner of Udupi Sri Krishna Bhavan in Bengaluru's Gandhi Bazaar area, decided to not partner with Amazon.
"Amazon wanted us to set up an RO plant, use water softeners. We already meet the FSSAI standards and that's why we didn't feel the need to meet the conditions set forth by Amazon," Holla said.
Those who did comply with Amazon's criteria said the process of onboarding and maintaining a customer relationship by Amazon has been very patchy.
"Amazon wanted to check our service contracts on pest control, maintenance of RO plant and several such certificates. But though we met the conditions and were onboarded, we could not figure out who the relationship manager was at Amazon for several months because most of the audits were being done by third-party representatives," said Rakesh of Priyadarshini Grand.
Lack of a proper channel of communication, and poor insight on Amazon Food's plans to scale has left several restaurant owners uncertain about their partnership.
"In our early conversations with Amazon, they told us they do not want to make the same mistakes that Swiggy and Zomato have made, but they are doing a worse job," said Kapoor.
AMAZON SAYS FOOD 'MOST FREQUENTLY ORDERED' CATEGORY
Amazon on its part says the response from customers is good.
In a response to detailed questions by CNBC-TV18, an Amazon spokesperson said food had become "the most frequently ordered category on Amazon."
"We launched Amazon Food in Bangalore earlier this year allowing customers to order from handpicked local restaurants and cloud kitchens that pass our high hygiene certification bar. We are adhering to the highest standards of safety to ensure our customers remain safe while having a delightful experience. We are conducting free-of-cost hygiene audits and we have received appreciation from our restaurant partners for helping identify gaps in their processes/infra and tremendous support from them in fixing these gaps and meeting these standards," the company spokesperson said in a statement.
"We are humbled by the response as customers are ordering multiple times in a week and have appreciated the end-to-end experience, the hygiene certified selection, tamper proof packaging and have made us the most frequently ordered category on Amazon today. It is still Day 1 and our ambition is to serve millions of customers and partner with restaurants across the country."
Amazon's food delivery business in India is headed by Raghu Lakkapragada, who was recently chief operating officer of fashion platform Voonik. Before that, Lakkapragada spent multiple years at Amazon, working on payments and with sellers.
In March, the company had announced it had on-boarded top brands such as Burger King, Taco Bell, Subway, Behrouz Biryani, Faasos, Chai Point, Freshmenu, MOJO Pizza, Punjab Grill, Box 8, as well as Bengaluru favorites such as Adiga’s, Empire, A2B, Anand Sweets, Kannan Café, Toscano, Toit, Burma Burma, Mamagoto, Brik Oven, Gilly’s, Big Pitcher, Kapoor’s Café, Chinita, Windmills Craftworks, and Polar Bear.
Restaurant partners are hopeful that Amazon will pick up the pace and help them reach out to more customers. "We have had high hopes from Amazon, and we have done necessary audits across more of our outlets to be ready if Amazon picks up pace," said Empire Hotel's Haq.
However, Amazon's plans to expand food delivery beyond Bengaluru has not been clear. Anurag Katriar, President of the National Restaurant Association of India said, "There have been no discussions with Amazon on their food delivery business in other cities such as Mumbai. We have not heard from Amazon about their food delivery business. They seem to be still on the limited trial mode in Bengaluru."
FOOD DELIVERY IS TRICKY SAY EXPERTS
Some industry executives believe that while Amazon has been successful with regular deliveries through its hub and spoke model, in which delivery executives can pick up their orders from a hub and complete deliveries in a particular region, food delivery is more real-time and hyper-local, requiring a different model.
"Food delivery needs a constant balance between demand and supply, especially during peak hours, and therefore, if restaurants are getting too many orders, or if there are very few delivery partners logged in in a particular area, food tech platforms accordingly update customers and restaurants that there could be delays," said an executive with a food-tech firm who requested anonymity.
Amazon has not had much luck with its food delivery business even in its home country. In 2019, the company announced it was shutting its restaurant food delivery business in the United States after four years of operations, where it was competing with DoorDash, Uber Eats and GrubHub. It had also shut a similar service in the United Kingdom after two years of operations, as per reports. Amazon, however, took a minority stake in UK-based food delivery startup Deliveroo last year. Their success in India is still to be tested.

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