E-commerce giant Amazon has shocked the retail-sector with their multi-million-dollar investment in U.K-based global food-delivery service, Deliveroo. Amazon were the largest investor in Deliveroo’s Series G funding round, joining existing backers T. Rowe Price, Fidelity Management and Research Company and Greenoaks.
The funding round raised a total of $575million for Deliveroo bringing the total funding to date to $1.53bil. The cash infusion will no doubt accelerate Deliveroo’s plans for growth and intensify the competition within the food-delivery market. Will Shu, the co-founder of Deliveroo deemed Amazon “an inspiration” stating “We look forward to working with such a customer-obsessed organisation.”
Amazon’s second attempt at the U.K delivery market:
This isn’t the first time Amazon has played a part in the U.K delivery market. In 2016 Amazon launched ‘Amazon Restaurants.’ The service that was offered exclusively to prime members and allowed them to pay just £1.99 to have food delivered to their doorstep in under an hour. The platform struggled to be adopted by the U.K market forcing Amazon to close their U.K arm just two years later in December 2018.
Deliveroo’s strategy for growth:
Deliveroo plans to use the cash injection to expand their tech & engineering teams at their U.K HQ, attract new customers and expand their delivery-only Editions “Dark Kitchens.” Deliveroo’s Dark Kitchens aren’t high street retail restaurants, but instead is a kitchen hub with a handful of workspaces so that restaurants are able to prepare meals and deliver food to new markets, without the burden, cost and permanence of expanding their store network. The different restaurants within the facility have their own chef and staff but share cooking facilities. The Editions kitchens are funded by Deliveroo, meaning the restaurants don’t have to pay utilities or any rent. Dan Warne, the Managing Director of Deliver in the UK stated “ The whole idea is to help restaurants expand into new areas without necessarily having the same cost-base they would have in expanding on the high street.”
Deliveroo were also first to market with a premium subscription offer with Deliveroo Plus. Customers can enjoy unlimited free delivery for a set fee of $18.99 a month.
Amazon’s investment – effect on the Australian Market:
The Australian online takeaway food market is estimated by Uber Eats to be worth at least $1.5billion, sitting at 8% of the total $18billion takeaway food market. Uber Eats currently hold the largest share of the Australian market despite launching after competitors Deliveroo and Menulog. UberEats have been so successful in the Australian market that their food sales are currently growing faster than their ride-sharing revenues. Coming in second is MenuLog (merged with EatNow) followed by Deliveroo in third place.
Although the market competition is fierce and Deliveroo are currently third in the race to the top, they’re making large strides for growth. With their expansion of ‘Editions’ kitchens, introduction of their subscription service and now the investment from tech-giant Amazon, Deliveroo are in a position to shake up the Australian food-delivery market. They’re the one to watch.