Amazon Tests Food Delivery Service In Bangalore, India, While Local Players Struggle

Amazon (AMZN) has initiated an online food delivery service, called Amazon Food, in India with a trial run in the southern city of Bangalore, also known as Bengaluru.

The online retail giant, which is investing $6.5 billion to expand in India, postponed the venture in Bangalore until the easing of the nationwide lockdown to prevent the spread of covid-19.

Some 100 restaurants and kitchens are involved in the trial run in Bengaluru. If the endeavor is successful, Amazon plans to offer similar services across India.

Amazon Food will initially be available in four suburbs of Bangalore.

"Customers have been telling us for some time that they would like to order prepared meals on Amazon in addition to shopping for other essentials," Amazon said in a statement. "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. We are launching Amazon Food in select Bangalore [zip] 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.”

But Amazon enters the Indian food delivery market at a precarious time.

In India two domestic companies, Swiggy and Zomato, dominate the food delivery market. But their businesses have been badly hurt by the pandemic and lockdown.

Deepinder Goyal, the founder of Zomato, cut his workforce by 13% in early May.

“A large number of restaurants have already shut down permanently, and we know that this is just the tip of the iceberg,” Goyal said. “I expect the number of restaurants to shrink by 25%-40% over the next 6-12 months. What actually happens, for better or worse, is anybody’s guess.”

He added: "We do not foresee having enough work for all our employees.”

Swiggy has also laid off hundreds of workers.

Swiggy said the pandemic has "severely impacted" its food delivery business and that it will also scale back its cloud kitchen operations.

“While [covid-19] might have long-term tailwinds for the delivery business and digital commerce when things settle eventually, nobody knows how long the uncertainty will last. We, therefore, need to be prepared to see through this winter, to emerge stronger on the other side,” said Swiggy cofounder Sriharsha Majety.

Earlier this year, Zomato acquired the Indian operations of Uber Eats, which abandoned the Indian food delivery market.

While Swiggy and Zomato have together raised more than $2 billion, they each remain unprofitable and are reportedly losing more than $15 million each month.

Despite the harm imparted by the pandemic, the food ordering market in India is expected to surge in the coming years,

Business consultancy firm Market Research Future said the Indian online food ordering market will grow by more than 16% annually and touch $17.02 billion by 2023.

“In a post-virus era, the online food delivery market in India is positioned for growth. From the short- and long-term view, Amazon’s entry into the food delivery market is opportune,” said Prabhu Ram, head-industry intelligence group at CyberMedia Research, a technology market advisory firm.