Amazon invests in Deliveroo to take a slice of the UK online grocery industry

May 22, 2019, 9:02 AM GMT+0

Online retail giant Amazon has made a large investment in food courier Deliveroo, taking a stake in the start-up’s latest £450 million fundraising round.

Amazon has attempted to enter the food delivery market before with Amazon Restaurants UK which was shut down last year. Amazon also runs Prime Pantry, a service allowing Prime members to order grocery essentials straight to their home within 24 hours.

Deliveroo is one of Europe’s fastest growing technology companies and its customers have more indulgent than average attitudes to eating out. YouGov data shows that almost three quarters (73%) don’t think eating out should be reserved for special occasions, compared to 26% of Britons as a whole.

News of the investment sent shockwaves throughout the grocery sector as it pairs two of the biggest threats to the supermarket giants, who have already highlighted companies that act as intermediaries between restaurants and customers as a threat to grocery spending.

Amazon and Deliveroo are similar in that they don’t actually provide the products they sell directly. Their customers also share similar views about convenience and eating out, according to YouGov Profiles data, and overlap significantly.

A quarter (26%) of consumers who use same-day delivery services like Amazon Prime have used Deliveroo in the past three months, compared to 3% of Prime Pantry users and 9% of the UK as a whole.

Although this shows that customers who order groceries straight to their home aren’t interested in eating restaurant-prepared food, it does imply that those who already use quick-delivery services like Amazon Prime, are likely to favour other services that offer the same speedy service they’re used to, e.g. Deliveroo.

Those who use quick-delivery services certainly order takeaways more than average Brits; 43% of Prime Pantry users and two thirds (64%) of Deliveroo users often order takeaways, compared to a quarter of a nationally representative sample (25%), proving customer engagement is high.

The food takeaway market is proven to be lucrative, with more than quarter (26%) of Deliveroo users spending between £101 and £200 a month on eating out. Similarly, almost a quarter (24%) of those who’ve used Prime Pantry have spent between £26 and £50 a month.

A partnership with Deliveroo could help Amazon expand into food delivery via an existing customer base, following its earlier attempt to build one from scratch.

Image: CNBC

This article previously appeared in City A.M.