After months of planning and preperation to start its online food delivery operation in India, the US-based e-commerce behemoth Amazon has started the pilot in India in select neighborhoods of Bengaluru.
To begin with, Amazon has opened its food delivery platform for its own employees and is soon to start services in posh neighborhoods with a high density of offices and high-rise buildings. According to a local media Economic Times (ET) report, the company has identified five localities in Bengaluru to launch the pilot.
Two restaurants informed ET that Prione Business Services, a joint venture between Catamaran Ventures and Amazon India, has been signing contracts with brands to list on Amazon. “The launch (of Amazon’s food delivery business) is scheduled in March, and the service will be launched on the Prime Now app,” one person aware of the plans told ET. The company will list restaurants on its Amazon Prime app.
“We believe in innovating on behalf of our customers. As part of this commitment, we are constantly evaluating new areas and opportunities to connect with and serve our customers,” an Amazon spokesperson said.
Amazon plans to ask for dirt cheap commission ranging between 10% to 15% from its restaurant partners to compete with the existing leaders—Naspers-backed Swiggy and Alibaba’s Gurugram-based portfolio company Zomato. To put this in perspective, Zomato and Swiggy charge a commission of anywhere between 22% to 30% for its services.
This comes at a time when the competition in India’s soon-to-be USD 12.53 billion food tech industry was reduced to a duopoly when Zomato acquired the India operation of Uber Eats in January this year for USD 350 million.
In the past few months both the industry leaders have been trying hard to cut down on discounts and offers to chase profitability and positive unit economics. However, with a new deep-pocketed competitor in the market asking for a cut-throat commission rate, the duo might have to rely on discounts and other promotions to keep their customer base safe.
It will be difficult for Swiggy and Zomato to rely on restaurants to work with them to come up with promotional offers as restaurateurs are already miffed with them for several reasons. National Restaurants Association of India (NRAI) has maintained its stance that prolonged promotional offers such as discounts have affected their business.
NRAI and food delivery startups have long been in discussion since late last year to resolve disputes over discounting, data sharing, and commissions. A similar meeting on Tuesday ended with no concrete decisions made. The restaurant body is demanding food delivery platforms to share customer data with them to better understand their footing in the space and make changes accordingly. However, food delivery companies have maintained their stance of not sharing such data over privacy issues.
NRAI on Tuesday met with the officials of Department for Promotion of Industry and Internal Trade (DPIIT) to put food services aggregators in the e-commerce marketplace category. The move is to ensure Zomato, Swiggy, and other restaurant aggregators don’t command the price as the FDI policy prohibits e-commerce companies with foreign funding from interfering with the prices of listed products.
“We are also approaching the Competition Commission of India to formally make a representation and petition on the practices being followed by the aggregators which need clarity,” restaurant association president Anurag Katriar told ET.
According to a RedSeer report, Zomato and Swiggy have shown more than 3x growth in 2019 with a combined 2.6 million orders a day. Swiggy has been slowly inching towards focusing more on its cloud kitchen operation and has launched two separate businesses to cater to the demand from restaurants. It recently launched BrandWorks to onboard fine-dining restaurants such as pubs to provide delivery only kitchen space. Its other brand Swiggy Access is open to all its existing restaurant partners that want to expand to new neighborhoods and cities without having to spend on infrastructure.
Last year Swiggy said it will invest USD 350 million in the cloud kitchen business. It recently raised USD 112 million led by South African internet giant Naspers, with participation from existing investors such as Meituan-Dianping and Hadley Harbour Master Investments.