On a broader view, platforms like Amazon, Zomato, Swiggy etc. are solving the same problem of logistics and providing convenience as an experience to the end-user. Undoubtedly, Amazon is a world leader in online delivery; they have mastered in managing logistics and providing excellent customer service even in India. Adding to it is Amazon’s excellent loyalty program “Prime” that could be a game-changer, as it also provides several other benefits to users (a huge bundle of services). Amazon has successfully implemented its pantry business in India, and this success could be a big boost before food delivery launch in India. So given their experience, efficient processes, their loyalty program and their deep pockets, they could be a big threat to Swiggy & Zomato in food delivery business in India.
Food delivery is very different from other delivery businesses, it is very hyperlocal in nature that it has to be delivered from a specific restaurant and within the stipulated time to keep it fresh & hot. This is unlike the regular pick-up and drop service of Amazon. But food delivery is not new to Amazon, they had launched it way ago in 2015 in the US and London to compete with services like Grubhub.
The situation in India is more or less similar to the situation in Seattle and NY in 2015. The platforms like Grub Hub and Postmates were brands built on food delivery as their core business, by 2015 (before Amazon launched food delivery). Drawing an analogy, Swiggy & Zomato have done something similar in India, and they developed their core competencies (their own maps, delivery fleet on ground, restaurant & customer segments data and most importantly their cloud kitchens) through food delivery, they invested heavily in branding, advertising & promotions and sustained discounts. They definitely have the first-mover advantage in India, with aggressive campaigns they have educated Indians on online food delivery. Uber Eats was another service from Uber, which was successful in the US and wanted to reap benefits out of this situation in India and failed miserably. This was mainly due to Swiggy and Zomato fighting it out with several restaurants to be exclusive on their platforms only. This has caused Uber Eats to pivot their value proposition, and they created low price combos and meals to attract the low price segment. But they failed again to scale this and mounted heavy losses.
In the US, due to stiff competition from Grub Hub, Postmates etc. Amazon shut its food delivery business in June 2019. On a merrier note, though they exited from the food delivery business, they kept their ambitions alive by purchasing stakes in Deliveroo, a UK based food delivery platform. So the question is same again, can Amazon pull it off now? Have they learnt their mistakes from US & London? Have they not been threatened by the failure of Uber Eats in India?
Adding to this, the current Covid scenario has hit the restaurant business heavily. Swiggy & Zomato have also downsized and are trying their luck in groceries and alcohol delivery. Yes, Amazon food delivery was on the cards since a long time but when most of the restaurants are shutting down, when Swiggy & Zomato own a lot of cloud kitchens already, users shying away from ordering online, Is this the right time to test their food delivery business in India?
In my opinion, it seems more like a sunk cost bias, this was on their plan, with investments and efforts put in already, they had to test it soon. If not this, given that Zomato & Swiggy are turning towards groceries, they could also enter into Amazon’s core. So it could also be a feint tactic or a Guerrilla warfare tactic of Amazon as a part of their strategic interdependent strategy.