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Amazon expands deal with Grubhub for food delivery

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Amazon (AMZN) is beefing up its food delivery benefit through its Prime service, expanding a business partnership with Grubhub and reinforcing your offerings as merchants and retailers increasingly compete for revenue from subscriptions and bundled services.

Prime members will now have free access to Grubhub+, a $120-a-year subscription service that includes free deliveries on eligible orders and lower service fees. Amazon customers and Prime members can also start ordering from Grubhub directly on the Amazon website and app, the company announced Wednesday.

The Grubhub benefit reinforces Amazon Food Deals, which operate on multiple pins. They include the traditional Amazon chain, which delivers non-perishable foods; grocery delivery through Amazon Fresh, Whole Foods and other retailers; and, with Grubhub, takeout. During Amazon’s latest earnings callCEO Andy Jassy said both the non-perishable and food businesses were growing.

Amazon advertises more than 300 million items available with free Prime shipping. (AP Photo / David Zalubowski) (ASSOCIATED PRESS)

“Amazon already offers a lot of value, but it needs to continue to innovate as more retailers develop their own loyalty and membership programs,” said Neil Saunders, retail analyst at GlobalData. “It’s also a way to make Amazon a one-stop shop for food needs.”

The Grubhub benefit, which solidifies and expands a previous trial offering, underscores Amazon’s efforts to transform Prime into a comprehensive membership program.

“Prime is all about convenience, savings, entertainment, increasingly healthy, and with Grubhub, we are deepening the partnership to truly represent food delivery as well, and truly complete, in a simple membership, all the needs and desires of people. working families across the United States,” Jamil Ghani, vice president of Amazon Prime, told Yahoo Finance in an interview.

Ghani declined to comment on the possibility of Amazon acquiring Grubhub. The original announcement of the Amazon and Grubhub partnership in 2022 included the option for Amazon exercise warrants for a 2% stake in Grubhub as well as additional warrants exercisable for up to another 13%.

“I don’t think an acquisition is on the cards at this point, although it could be of interest in the future,” Saunders said. “Amazon is currently thinking about increasing efficiency across businesses rather than making big deals. Amazon would also need to be convinced that it could add value to Grubhub or parent company Just Eat to do a deal.”

Ghani said the company sees the Grubhub deal as part of Prime’s value progression. What started in 2005 as an untested free shipping service has become an e-commerce juggernaut. Subscription benefits have expanded to streaming and music, medical servicesThursday night football and takeout.

The story continues

Previously, Amazon offered Prime members a one-year trial of Grubhub+ which has been converted to a paid subscription. Under the new deal, Prime members just need to activate the ongoing Grubhub+ offer to receive the free, ongoing benefit.

For Grubhub, which is owned by Just Eat Takeaway.com (TKWY.AS), Saunders said the partnership is a way to expand membership, which helps earn more restaurant commissions.

Just Eat shares are down nearly 14% year to date, lagging competitors DoorDash (FEATURE) and Uber (UBER), whose share prices rose 16% and 11%, respectively. While customers flocked to food delivery companies during the height of the pandemic, the business model continues to face questions about sustainable profitability.

Amazon shares are up more than 20% year to date, outpacing the Nasdaq Composite (^IXIC) Increase of 15%.

Hamza Shaban is a Yahoo Finance reporter covering markets and economics. Follow Hamza on Twitter @hshaban.

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