Amazon’s Deliveroo Investment Puts Amazon in Competition With Uber and Just Eat UK
Amazon’s Deliveroo investment, representing its latest push into the UK food delivery market, was facing mounting opposition this week as critics of a $575m deal with Deliveroo voiced concerns about the control it will exercise over the UK business.
The food delivery company Deliveroo announced its deal with Amazon on Friday. Saying that Jeff Bezos’ e-commerce empire was the lead investor in a giant $575m (£450m) funding round, taking the total amount of cash raised by the business to $1.53 billion.
The announcement of the Amazon Deliveroo investment sent shares in rival online food delivery companies such as Just Eat and Takeaway.com falling fast.
Deliveroo to use Amazon’s investment for Technology
The UK delivery company said it would use the cash injection to “invest heavily” in its technology. Deliveroo company founder Will Shu claimed he looks forward to working with Amazon, which he described as a “customer-obsessed organisation”.
Amazon’s own Food delivery failures
Amazon’s investment in Deliveroo comes on the back of Amazon pulling back on its own restaurant delivery business in the UK. It closed the London arm of the service in December last year.
Amazon shut the doors to its own food delivery business Amazon Restaurants in the UK in 2018 – after just two years. Amazon Restaurants had struggled in a highly competitive market dominated by the likes of Just Eat, Deliveroo and Uber Eats, all of which deliver food to consumers who make orders through smartphone apps.
Deliveroo’s Synergy with Amazon fulfilment
The Deliveroo investment may have been driven by the appeal of a network of couriers to Amazon for logistical and staff loyalty reasons.
Delivery staff are usually paid for each completed delivery. If Amazon can ensure that the people making their deliveries have little or no downtime, then delivery staff can make more money and are therefore less likely to go and work for a rival.
If they are able to transport both goods from Amazon Prime Now, which promises deliveries within two hours, and Deliveroo meals, then the likelihood of downtime is reduced.
Deliveroo to help Amazon logistics with “Dark kitchens”
Deliveroo’s push into so-called “dark kitchens” might also help with Amazon’s logistics.
These are facilities which aren’t attached to a physical restaurant, often housed in shipping containers on affordable sites dotted around London.
While the model remains unproven, the idea is to reach more customers without the pricey overheads that come with an actual restaurant. Those locations could also act as last-mile fulfilment centres for Amazon. Deliveroo plans to use many of the proceeds from the latest fundraising to open new sites.
Political Controversy over Amazon Deliveroo Deal
Amazon’s Deliveroo investment provoked immediate controversy from politician Tom Watson MP, deputy leader of the Labour Party the main Opposition party in the UK. Watson demanded an investigation by the UK’s competition watchdog into Amazon’s ploy to get its “mighty claws” on more consumer data.
“Amazon is obsessed with tracking tools, micro-targeted ads, extracting billions through monetising our personal data,” Watson said. “They want Deliveroo’s tech and data… They want to know how best to extract your cash throughout your waking and sleeping hours.”
Market Sceptical over Amazon deal with Deliveroo
Market analysts are sceptical of the idea that Amazon’s Deliveroo deal can succeed in overthrowing Just Eat, which retains a dominant position in the UK food delivery market.
“Just Eat has something like three to four times more of the market share than Deliveroo and Uber Eats combined in the UK,” said Ian Whittaker, research analyst at investment bank Liberum. “60pc of their customers are in small towns, where the economics of Uber Eats and Deliveroo just don’t work.”
Mr Whittaker added that the Amazon investment appears to be more about the company keeping “in touch with the market.” This feeling was echoed by other market analysts. Broadly, they just don’t believe Amazon will push hard to dominate the food delivery market.
“We don’t know how much of the $575m of funding Amazon contributed, but considering it’s got $23bn of cash on its balance sheet, this won’t break the Bezos piggybank,” said Hargreaves Lansdown analyst Laith Khalaf.
UK daily active users of food delivery apps, 2018
Just Eat 499,603
Uber eats 50,647
SOURCE: FINANCIAL TIMES
Faster Prime Shipping Service in the USA Monthly Storage fee discount
Amazon recently announced that in the US they are in the process of evolving their Prime shipping offer. Prime has historically been a two-day program. However, Amazon is aiming to move it to guaranteed one-day shipping in all the Lower 48 states.
The e-commerce giant simply wants customers to get their orders quickly. Amazon said, “We have found they order more products when there is a one-day delivery promise.”
Official Amazon Advice to 3rd party sellers
“You can make the most of this …by provid[ing] enough inventory of your most popular products so that we can place it close to customers.”
To help sellers get started, Amazon announced a monthly storage fee discount so that sellers could supply more of their most popular products. The promotion begins June 1, 2019, and will run through January 31, 2020.
To qualify for reduced fees of up to 75%, suppliers must supply inventory within a target inventory range in a given month. See details below.
How to get the monthly storage fee discount
1. Determine your eligible FBA products
Products become eligible in either of the following ways:
- Standard-size products with 60 or more units sold in the month are eligible. OR
- Before the start of each month, we will flag products in the Restock Report that are automatically eligible.
2. Maintain the target inventory range
- Keep your inventory level between 4 to 8 weeks of cover on eligible products for at least 21 days in a given month to qualify for the discount each month. OR
- For products flagged as automatically eligible in the Restock Report, keep your inventory level in the range published in the Restock Report for at least 21 days in a month to qualify for the discount.
“Weeks of cover”
Weeks of Cover Trailing 30 Days
If you sold 400 units in the last 30 days (4 weeks) for a given item and had 100 sellable units in Amazon fulfillment centers, your Weeks of Cover t30 would be 1.
3. Get the discount
Eligible products that meet the inventory level criteria in a given month will get discounted storage fees in that month. See the table below for discounts. Earn 50% to 75% off monthly storage fees!
Monthly storage fee changes on eligible products when qualifying inventory levels are met
Standard-size (without target inventory)
Standard-size (with target inventory)
January – September
$0.69 per cubic foot
$0.17 per cubic foot
October – December
$2.40 per cubic foot
$1.20 per cubic foot
3rd-party sellers can earn Discounts starting with June’s storage fees (charged in July). Amazon has advised sellers to start planning their shipments from late May.
For more guidance on earning the monthly storage fee discount, visit Target inventory monthly storage fee promotion.