Amazon’s (AMZN) June announcement that it would purchase Whole Foods for $14 billion marked just the beginning of its efforts to dominate the food category. In July, reports uncovered the company’s roll-out of cook-at-home meal kits. And its latest announcement extends its focus on local food delivery, which solidifies its focus.
On Friday, the e-commerce giant announced a partnership with Olo, a delivery service company that powers 40,000 restaurant locations across the country. Olo—which counts Chipotle (CMG), Shake Shack (SHAK) and Dine Equity’s (DIN) Applebee’s as customers—says they see this partnership as a big opportunity for Amazon to gain scale with restaurants.
“There is a huge footrace going on in terms of companies launching delivery marketplaces,” Olo founder and CEO Noah Glass told Yahoo Finance. “A deal like this allows access to a broad swath of the restaurant market, including marquis brands.”
Olo, which has Shake Shack founder Danny Meyer as an investor, provides the technology platform to take orders directly to restaurants’ point-of-sale system, helping Amazon conquer the “last mile” efforts reaching customers locally.
Glass explained that the partnership not only simplifies the process for restaurants as orders come in but allows management of orders for restaurants, particularly during peak hours.
Growth in take-out
62% of restaurant-industry food transactions are consumed outside the restaurant, according to Glass, leaving a huge opportunity for names like Amazon that can take advantage on the delivery logistics side. In fact, the market for US restaurant delivery orders is expected to grow to $76 billion in 2022, from $43 billion today, according to Cowen & Co.
Companies have already been capitalizing on this growth. Food delivery name GrubHub (GRUB) is up almost 40% year-to-date (though off as much as 6% on Friday after the Olo-Amazon partnership announcement).
And more individual names are looking to invest in delivery. Even mass chains like McDonalds (MCD) which announced a partnership with UberEATS earlier this year.
Glass explained that Olo’s “Rails” app helps restaurants by going directly to point-of-sale instead of through multiple tablets that requires manually entering orders like with Seamless-Grubhub.
And Glass added the new partnership with Amazon for food delivery could extend to other categories in efforts to dominate the “last mile” reaching customers.
“I think food is just where this starts,” Glass said. “There are big players in the space with big ambitions beyond just food. We’re excited to be a part of this developing market.”