Why Amazon’s investment in Deliveroo could be good news for consumers
In May 2019 the global e-commerce powerhouse Amazon invested roughly 500 million USD in the British food delivery service Deliveroo leading to a 16% equity stake in that company. The British competition watchdog Competition and Markets Authority (CMA) issued a statement asking both companies for concessions (usually agreeing to sell off some businesses or leave some markets to reduce market shares) in order to see the deal green-lighted. While the battle for leadership in the global ready-to-eat meal delivery market has been on for years, Amazon’s (re-)entry in this market might be excellent news for consumers.
Right now Deliveroo is mainly active in European markets (though it left one of its main markets, Germany, earlier this year due to labor disputes) and currently expands into Asian countries. It competes with similar companies such as UberEats or Delivery Hero. As an early adopter of such services I have tried most of them in various European cities. One common weakness of their offering can be seen in their predominating business attitude of focussing more on acquiring and keeping more restaurants on their platform instead of servicing their (ordering end-) customers.
Some of the poor customer experience can be seen in the lack of standardized (or non leaking) packaging and usually little to no help in case of missing items, cold food, or massive delays. Customer service usually tells you that they are merely the broker and are not liable for the restaurants faults. And while the platforms usually refund you for missing food, this is usually not what you want when you are very hungry on a Friday evening and need to rush to the movies (such a situation and a no-show of my pizza was when I deleted Deliveroo from my phone).
Amazon tried restaurants once before and failed in the UK market. They might have been too early or were not able to get sufficient market shares quickly enough. Their new and very pricey attempt to get back into the European ready-to-eat meal delivery should be applauded by consumers:
Amazon is one of the most customer-centric companies out there. The consumer is usually always right and Amazon is there to make it right. Amazon’s grocery service Fresh is a great example on how to constantly provide customer service on a high level.
That consumer focus is currently lacking in the food delivery sector. A strategic investment in food delivery companies with combined know how transfer and keeping the importance of the end user in mind could really bring food deliveries to the next level. Great for everyone who does not have time to cook a meal every evening!
Apparently the CMA sees this differently. The BBC reports:
But, on Friday, the regulator said Amazon had failed to deal with "initial concerns that their investment in Deliveroo could be bad for customers, restaurants and grocers".
The CMA is worried that Amazon's plans to invest in Deliveroo could stop it from launching a rival company, which would increase competition and potentially lower prices for consumers.
If competition watchdogs now stop any attempt of horizontal integration of companies because they are worried that this would stop the creation of new companies we would open the floodgates of antitrust litigation.
Let’s also keep in mind that the meal delivery market is losing hundreds of millions a year in the UK alone. The CMA stopping consolidation of the market will also prevent this sector to turn profitable in the near future – and that could jeopardize the success of this entire industry in Europe.
I really hope that the CMA will listen to consumers that actually use food delivery services and don’t just stick to the old antitrust textbook of an analogue world or the pressure from brick and mortar retailers who might have missed the train of going digital and convenient. A dash of Amazon’s customer-centricity might make me reinstall Deliveroo and use it for good.