After leading a $575 million investment into Europe’s Deliveroo last month, Amazon is shutting down its Amazon Restaurants arm later this month and effectively calling it quits on directly competing with the largest U.S. delivery brands including Grubhub, DoorDash, Uber Eats and Postmates.
Grubhub shares jumped on the news, and delivery analysts were quick to weigh in with insight, including Cowen’s Tom Champion who said the online giant’s move was “not terribly surprising, given restaurants never appeared to be a major priority for Amazon” and adding that it failed to break out beyond “single-digit market share in most markets.”
With its still-fresh investment in Deliveroo, based in the United Kingdom, it’s clear Amazon is maintaining a toehold in food delivery, while mega providers like DoorDash continue raking in massive investments and stealing market share from primary competitors. Champion added that the news was largely positive for Grubhub and others “as these Amazon orders migrate to other platforms.” GRUB shares rose modestly on the news.
BTIG analyst Peter Saleh echoed Cowen, saying Amazon’s announcement is likely a positive for other delivery providers. Saleh said his team continues “to believe that exclusivity is only temporary and expects restaurant brands to migrate toward multiple delivery platforms.” He added that Amazon hadn’t been “an aggressive player in the segment” and speculated that the tech giant is likely to acquire, rather than build its own delivery business in the U.S. in the future.
A recent report from Edison Trends showing U.S. delivery market share leaders didn’t single out Amazon Restaurants, placing the brand in the “other” category behind DoorDash (27.6%), Grubhub (26.7%), Uber Eats (25.2%), Postmates (12.1%) and Caviar (2.7%)
Amazon’s PR team declined to offer additional details about the move beyond forwarding a generic statement. “A small fraction of Amazon employees are affected by this decision, and many of those affected have already found new roles at Amazon,” said a company spokesperson. “Employees will be offered personalized support to find a new role within, or outside of, the company.”