Zomato and Swiggy have been dominant players in India’s food delivery industry. But, that is about to change. Earlier this week, e-commerce giant Amazon announced the expansion of its own food delivery service Amazon Food across Bengaluru.
For now, Amazon Food is available across 62 pin-codes covering key localities in Bengaluru. While the limited launch will have little impact on Zomato and Swiggy, Amazon Food will pose a risk to both the players as it can shake up the established setup with a focus on profitability, broking firm Motilal Oswal Financial Services said on Wednesday.
“Our initial channel checks of restaurants in Bengaluru suggest Amazon is charging a take rate of 10 per cent on order value from restaurant partners. This is less than half of what the duo (Zomato and Swiggy) charge from restaurants (22-25 per cent), which has increased over the years,” wrote Motilal Oswal analysts Anmol Garg and Mukul Garg.
Take Rate is essentially the percentage of a transaction that a company gets from sales; it's like fees and commissions on a particular delivery. The increase in take rate has enabled incumbents to curtail their losses, a high priority for both players, the analysts note.
For Amazon, food delivery will be another way to attract customers to and scale its Prime membership programme.
Prime members get free delivery on all their orders, while other customers can pay a nominal delivery fee of Rs 19 for their orders from Amazon Food.
“Customers trust Amazon for all their unique shopping needs across categories. With the expansion of Amazon Food in Bengaluru, we continue in our endeavor to offer unmatched convenience and value while being a part of their everyday lives. Amazon Food brings some of the city’s top restaurants including national outlets as well as local favorites which are popular and follow strict delivery and safety protocols,” said Sameer Khetarpal, director, category management, Amazon India.
According to Amazon, customers in Bengaluru can order food from over 2,500 restaurants and cloud kitchens. In comparison, Zomato has 15,000 restaurants within Bengaluru on its platform, pointed the Motilal Oswal analysts. While, Amazon’s scale is limited, over time as it expands, there could be a risk to the existing duopoly structure, the analysts felt.
“Increasing competition (in case of an Amazon expansion) can lead to another prolonged period of cash burn in the industry,” they said.
