In India, Jeff Bezos met the biggest industrialists – and Bhavish Aggarwal. So what is the Amazon boss planning? Analyzing recent interests of the world’s richest man, the Ola Boss’ Foodpanda business might have something to do with it.
On 17th January 2020, Jeff Bezos during his 3-day visit to India met top Indian business barons. The meet included Chairmen and CEOs of industries leaders Reliance, Godrej, Airtel, Infosys, Future Group, Hindustan Unilever and several others. However, a name that stood out curiously was the young entrepreneur Ola Cabs Co-founder Bhavish Aggarwal.
The highlight out there from Bezos’s visit was a USD 1 billion investment promise in upcoming years – aimed at the retail sector particularly bringing 10 million small and medium businesses online. So, the move created a lot of buzz in the media – seen as Amazon’s plan to take on India’s richest man Mukesh Ambani’s recently launched Reliance JioMart head-on in the online grocery business.
How Jeff Bezos sees India as a future market?
According to RedSeer’s food-tech Market Updates, in 2018, the food-tech industry saw a GMV growth approximately to 140%. Order volumes increased enormously by 176%. Reports also suggest that Amazon plans to dominate India’s burgeoning market through its merging policies and huge investments. The world’s biggest online company has had a strong interest in entering the food delivery business – a sector in which Bezos sees a lot of potential.
As per Market Research Future, India’s food-tech market is expected to grow from US $5 billion (in 2019) to US $17 billion by 2023.
In 2015, Amazon globally launched its restaurant delivery business which was an unsuccessful venture that shut shop in June 2019. Then again in 2019, Amazon invested in a London-based food delivery start-up Deliveroo. However, Deliveroo was hit with controversy and is currently under investigation by the British competition watchdog. Thus, that put Bezos’ investment plan in Deliveroo on hold.
Moreover, industry sources claim that Amazon may be set to venture into the Indian food-tech market. In July 2019, news surfaced regarding Amazon’s plans to enter the food delivery services business in India. Sources claimed that Amazon could have launched its food delivery service in October 2019 during festive season but that was postponed. Since then, no concrete announcement has come out of Amazon on the subject.
Amazon’s Efforts to enter the Indian Food-tech market till date
Amazon was even in talks with various restaurant owners and food chain over commission charges. Despite intense competition, Amazon sees potential in the sector. Furthermore, it’s starting strategy in India is to cut commissions to a mere fourth of what food delivery giants Zomato and Swiggy charge their partners.
Amazon was signing up at a commission of 5-6% as compared to 20% that Zomato and Swiggy charges.
So, Amazon needs to invest US $500 million to build a food delivery business in India. Strategically, Amazon might be planning to acquire a food delivery business in India with Foodpanda. Ola owns Foodpanda which it acquired from German Firm Delivery Hero Group.
Furthermore, as per media reports, Amazon was also in talks with many players including Ola’s Foodpanda. In fact, the deal was reportedly in final stages where Amazon planned to acquire Foodpanda infrastructure from Ola. Foodpanda (India) was also recently in news for losing market against Zomato and Swiggy manoeuvred tactics of high discounts.
The UberEats setback for Amazon
Amazon was in talks to acquire UberEats but pulled back. Zomato took the advantage and acquired UberEats. So, that thwarted Amazon’s dream of entering the food-tech market as Zomato added US $250,000 to $300,000 worth of more orders to its kitty.
Eyeing Ola’s Foodpanda instead for Amazon makes sense. It will get easy access to Foodpanda’s infrastructure, restaurant connections and integration. Furthermore, proven order processing methodology, delivery executives and more will help ensure basic requisites are already in place as it expands.
Amazon’s strategy to win over restaurant owners
Foodpanda currently owns 4 private labels, i.e. FLRT, Grandma’s Kitchen, Lovemade, and Great Khichdi Experiment. It also lists more than 50 cloud kitchens and operates in Delhi, Pune, Chennai, Bangalore and Mumbai.
Similarly, Amazon even started delivering supplies to restaurants at discounted prices at the doorstep ahead of its food delivery launch. It seems Amazon found a win-win strategy by taking advantage of its supply links by offering one platform for all restaurants’ requirements. Likewise, it would help Amazon have deeper connect with restaurant owners.
Amazon hopes to bring down 10-15% material procurement cost for restaurant owners. That will allow the company to negotiate prices for customers ordering food online. Simultaneously, a low commission charge of 5-6% by Amazon will also accentuate the deal further. This one-stop solution for restauranteur is a full-stack operation by Amazon to strengthen reliability.
Full-fledged Entry in 2020
As per a Bloomberg report, 3 people who are aware of the development on the condition of keeping anonymity said before a full-fledged entry in the Indian food tech sector; Amazon has also started testing its food delivery service among its employees. This pilot testing allows selected employees to order food from Amazon prime delivery service. The company has also ramped up hiring.
As per Anurag Katriar, President of NRAI said, as the commission rate could fall the battle of acquiring customers will again kick-off, and it could lead to another war of offering high discounts in the Indian food-tech industry. Therefore, Amazon, with deep pockets and money burning strategies, could make the Ola-owned Foodpanda the leader in the online food delivery business in India.