Will Amazon Enter Local Food Delivery? Part III (Video)
August 19, 2019 | Contributed by: Mike Boland
This is the latest in LSA’s Skate To Where the Puck is Going series. Running semi-weekly, it examines the moves and motivations of tech giants as leading indicators for where markets are moving. Check out the entire series here.
What’s a cloud kitchen and why is it important? As we’ve covered over the past few weeks, these are kitchens that are purpose-built for delivery, as opposed to the playbook of a sit-down restaurant. That has all kinds of advantages, including cost (less overhead) and logistics (food fulfillment centers).
But one question emerges: What’s the actual food being made? Will cloud kitchens be an outsourced function for existing restaurants? Or will they be run by companies like Amazon or Deliveroo with white-labeled fare? Think of it sort of like Amazon Basics for food, or some brand it invents.
The right answer is “both.” Food is a product that relies on trust and brand affinity. That notion supports the first model mentioned above. But it’s also logical, and in character for Amazon, to white label the food choices. Its investment in Deliveroo is where it’s likely experimenting with such options.
The outsourced kitchen model has implications for existing restaurants, including SMBs. If they can utilize cloud kitchens — from Amazon or another entity — it might be a new form of operational support that joins the SMB SaaS universe. Or Amazon could go it alone and severely undercut local restaurants.
The latter is obviously a lot scarier, depending on where you sit. With a growing share of U.S. food consumption that’s prepared/delivered meals, the opportunity could be ripe. But any disruption will likely be limited within the low-mid market and QSR segments. Fine dining won’t be impacted as much.
We bat the question around on the latest episode of LSA’s Above the Cloud podcast. During an analyst roundtable episode, we covered the cloud kitchen and above burning questions. See the clip below for more, and listen to the full episode here. This will be an ongoing topic, including at LSA events.