Analysts say Amazon’s latest partnership with Grubhub will have little impact on the company’s stock but could signal a growing appetite to compete in the home delivery space. row. Last week, the tech company announced that it’s partnering with the distribution platform to offer Prime users a free year-long membership to Grubhub+. As part of the deal, Amazon will take a 2% stake in the company with an option to increase it to 15%. “If it stopped and started giving away for a year, I would say the competition is manageable,” said Bernie McTernan, an analyst at Needham. at Needham. “This is Amazon’s first foray into the restaurant delivery market, but we still don’t know exactly what the end game is here.” For Amazon, the stakes are low. Tom Forte, an analyst at DA Davidson, says the partnership is a risk-free way to continue adding value to a robust membership program with minimal capital. And, as consumer spending slows, that’s another way the company can expand its offering to retain subscribers, Morgan Stanley’s Brian Nowak wrote in a note this week. before. Restaurant Return Delivery Restaurant delivery is not a new Amazon initiative. The company entered the market in 2015, offering restaurant delivery in Seattle and more than 20 other US cities to Prime members. That effort was ended in 2019. Nowak said: “One difference this time around is that AMZN Prime members will have access to a larger restaurant offering than the previous restaurant offering. by AMZN. Morgan Stanley estimates there are 320,000 restaurants using the Grubhub platform in North America. While the partnership may have had little impact on Amazon, the pressure is still on Grubhub. Success means that there will be a large number of new customers after the trial period. Plus, it’s an opportunity to appeal to people who are having a hard time choosing to sign up for delivery to make purchases, McTernan said. Covid-19 has ushered in a new era of delivery as demand explodes while consumers shelter at home. But certain delivery companies have outpaced their peers. In April, Grubhub’s parent company Just Eat Takeaway.com said it was looking to sell the delivery company it bought for $7.3 billion by 2021. What that means for growth. Shares of both Uber and DoorDash fell in trading following the announcement by Amazon Tom White, an analyst at DA Davidson, said it was too early to tell what aftershocks the partnership would have on the market. delivery school. How it impacts the sector also depends on how active both companies are in promoting and marketing the service. Andrew Boone, an analyst at JMP Securities, wrote in a note last week: “While we acknowledge this increases competition for new diners, it will ultimately depend on location. and email marketing from Amazon, and we question the visibility this will get.” Grubhub’s offering, with its ability to reach millions of Prime subscribers, could help the company participate in DoorDash’s loyalty program, Bank of America’s Michael McGovern wrote last week. However, DoorDash “maintains a competitive edge in restaurant selection, logistics speed, and non-restaurant categories that will continue to generate profits from market share despite competition for everyday customers.” higher,” he said. Joseph Feldman, an analyst at Telsey Advisory Group, said the partnership could force other delivery companies or services to increase their offering or add more services. However, many platforms have long offered their own exclusive programs, he said, pointing to American Express, such as the monthly Uber cash offering to certain cardholders. Amazon’s game could encourage companies that don’t use third-party delivery services – like Domino’s Pizza – to jump on delivery platforms or force companies with exclusivity agreements to expand their services. , according to Citi’s Jon Tower. While the move may indicate an appetite for restaurant delivery, any Amazon plans to acquire Grubhub in the future could face regulatory pressure, White said. The real test for Grubhub, McTernan said, will be whether Prime customers continue to use it after the promotional period ends. He added that there are risks ahead as the economy appears to be entering a period of slowing consumption.
