Amazon may play a spoilsport in Zomato’s IPO ambitions

BENGALURU:  US e-commerce giant Amazon is planning to disrupt the online food delivery market in India , and its strategy is akin to what the company did in e-commerce .After initial disruptions due to COVID, Amazon is back on the track for expanding its food delivery business with the model already operational in Bengaluru. The foray into the foodtech industry comes at a time when the market leader Zomato is eyeing an IPO in April to raise$ 650 million . The other major rival, Swiggy is also flush with funds with the valuation hitting $3.6 billion mark last year.

However, Amazon’s entry into the food delivery segment signals bad news for both Zomato and Swiggy  as has been the case with the US e-tailer’s competitors worldwide. Whether it is food business or e-commerce, Amazon’s aggressive discounting, free deliveries , cashbacks are almost unparalleled and this could bleed both Swiggy and Zomato. In Bengaluru for instance, Amazon has started partnering with restaurants offering them the commission discounts ( charging nearly half as much as Zomato, Swiggy for each order).

Besides, Amazon’s huge base of prime subscribers are being offered free deliveries , which again is attracting consumers .Amazon prime membership is its biggest draw in India. The e-commerce giant’s India head, Amit Agarwal recently said that the prime membership increased 3x during the pandemic alone with a host of services like streaming, free and faster deliveries, exclusive  sales being availed by the users.

Sources privy to the development said that discounts ranging from 10-50% are being offered to consumers on a specific order value besides free deliveries which is a cause of worry for both Swiggy and Zomato. Amazon is  also offering cashbacks which will directly go into the customer’s Amazon Pay balance on the main app. Rivals like Swiggy and Zomato had last year increased their  commissions from the restaurants as well as the delivery fees , which increased the order value.

The huge logistics chain of Amazon is again an added advantage which will only help it achieve its market leader ambitions for food tech industry. Online food delivery business is expected to be a $12.5  market in India by 2023, as per Redseer estimates. The market has a duopoly with Swiggy serving 1.5 million orders per day and Zomato 1-1.2 million daily orders. Amazon’s expansion to cities including Chennai, Hyderabad is on cards and may further dent rival’s consolidation plans.