Amazon soft launches food delivery in India as Swiggy, Zomato cut costs

US-based retail giant Amazon has marked its much-awaited entry into India’s food delivery segment with a soft launch of the service in Bengaluru.

 The foray comes at a time when the country’s leading food delivery players, Swiggy and Zomato, are turning to massive layoffs and cost-cutting exercises to wade through the economic fallout of the COVID-19 pandemic.

Amazon Food, the food delivery service, is live in select locations in Bengaluru such as Mahadevapura, Marathalli, Bellandur and Whitefield where users can order food from local restaurants and cloud kitchens.

“We are launching Amazon Food in select Bangalore pin codes allowing customers to order from handpicked local restaurants and cloud kitchens that pass our high hygiene certification bar. We are adhering to the highest standards of safety to ensure our customers remain safe while having a delightful experience,” Amazon said in a statement.

Currently, it has listed a few packaged food brands such as Smoodies and Kitfresh; cloud kitchens FreshMenu, Khichdi Experiment, Box8 and a number of restaurants including Empire and Al Bek.

“Customers have been telling us for some time that they would like to order prepared meals on Amazon in addition to shopping for all other essentials. This is particularly relevant in present times as they stay home safe. We also recognize that local businesses need all the help they can get” the statement added.

After the hyperlocal bloodbath in India in 2016, Food delivery was largely dominated by four players - Swiggy, Zomato, Uber Eats and Foodpanda.

Online taxi unicorn Ola ventured into the food business in 2017 with the acquisition of the Indian business of food delivery platform Foodpanda from its Germany-based parent Delivery Hero in an all-stock deal. However, Ola closed down delivery operations within a year to focus on a cloud-kitchen model. Early this year, Uber sold its India food delivery business to Zomato for a 10% stake in the latter. The cash and stock transaction was done at a total consideration of $206 million.  

With these consolidations, Amazon enters a consolidated and organised market to compete with Naspers-backed Swiggy and Alibaba-backed Zomato.

Both Swiggy and Zomato have been shoring up funds and implementing several cost cutting measures to tide over the crisis.

Swiggy raised Rs 14.2 crore on Tuesday from Samsung Ventures in addition to the $34 million it secured from Tencent Holdings and others in April.

The Bangalore-based company said on Monday that it would lay off 1,100 employees and scale down some “volatile business verticals”, including cloud kitchens. Employees across functions and cities are affected by the layoffs, co-founder and CEO Shriharsha Majety said in a blog post.  

Last week, Alibaba-backed Zomato announced its plans to lay off 13% of its 4,000-strong workforce, among other cost-cutting measures. CEO Deepinder Goyal said in an open letter that he expected the number of restaurants to shrink by an estimated 25-40% over the next 6-12 months due to the lockdown. 

Zomato last raised capital in April, when Pacific Horizon Investment Trust, a fund managed by British investment management firm Baillie Gifford, invested $5 million in the company.