Amazon buys stake in Deliveroo, sights set on lucrative food delivery market
It’s an on-going question: which industry will Amazon disrupt next? At the end of last week, we got an answer: the lucrative food delivery market. Although Amazon isn’t pumping money into its own service – rather, it’s taken a stake in Deliveroo, a fast-growing start-up that’s in competition for the European market against players like Uber Eats and Just Eat. The London-based company will use its newfound wealth to bolster its existing technology and network.
Amazon’s share price is up by 26% so far this year
Source: Yahoo Finance
London is arguably the food delivery industry’s most competitive market. Amazon closed its own attempt at a food delivery service in the city last year. But Amazon does have far-reaching ambitions for food more generally, as its network of Whole Foods and Prime delivery service demonstrate. Could Deliveroo eventually be a part of this push? If so, could investors one day see synergy between the two, perhaps using Alexa as an ordering system? “Alexa, order my usual” could be the simplest way to get your favourite meal delivered yet. That, of course, remains a purely speculative observation at this point.
Diana Gomes, a consumer analyst with Bloomberg Intelligence, made the following comment: “Amazon’s investment should accelerate Deliveroo’s scale gains in Europe, heightening Just Eat’s investors’ concerns about slower order growth in its U.K. home market (50% of its business). Yet Just Eat’s lead in smaller cities and with independents (80% of U.K. orders) gives it breathing space over the still-unprofitable Deliveroo, which has been slower at gaining share outside larger urban centres.”
Dominion holds Amazon, as well as Just Eat and Grubhub, in its Global Trends Ecommerce Fund.
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