Will Amazon save Grubhub?
Will Amazon save Grubhub?
An extended partnership between the companies means *a lot* more visibility for the country's third-place delivery service.
On Thursday, Amazon and Grubhub shared some news: Shoppers on Amazon.com and the Amazon mobile app can now order food from restaurants, thanks to a revamped Grubhub partnership. The deal puts Grubhub’s brand in front of hundreds of millions of Amazon shoppers and gives some of them free delivery: Amazon Prime members receive free access, indefinitely, to Grubhub+, the company’s subscription-based free delivery and discount offering.
Amazon started offering Prime members yearlong Grubhub+ subscriptions in the summer of 2022. Theoretically, Prime members would then be charged for the service, but Amazon extended the offer for an additional year last summer.
The e-commerce giant and the one-time U.S. delivery market leader are getting cozier.
As part of the new deal, Amazon increases its stake in Grubhub and could eventually own as much as 18 percent of Grubhub shares.
Concurrently, Just Eat Takeaway has been trying to offload Grubhub… for years. It bought the company for $7.3 billion in June 2020, early in the pandemic amid peak delivery hype. But after the hype subsided, JET wrote down Grubhub’s value by over $3 billion. It’s been officially looking for a buyer since April 2022.
After ditching its restaurant delivery service, Amazon Restaurants, in 2019, Amazon has circled around restaurant delivery without biting. Amazon’s hesitancy could be Grubhub’s win as it steps in to fill a big void at the buy-everything company. If any company has the power and reach to boost Grubhub’s market share, it’s Amazon.
Indeed, in an interview (that I didn’t conduct), Grubhub CEO Howard Migdal signaled that Grubhub needs the kind of visibility Amazon can offer. Grubhub is Amazon Prime’s most successful third-party partnership, he said, and has driven a meaningful amount of business to the delivery platform. Of course, Migdal declined to provide any sort of specifics on how much incremental business Amazon has driven nor any other details to describe exactly how meaningful the partnership has become. (I guess we’ll have to take his word for it.)
Even so, Grubhub has a lot of ground to make up. According to April 2024 data from Bloomberg Second Measure, orders on Grubhub make up 8 percent of delivery sales. Uber + Postmates take a combined 25 percent, and DoorDash wins what so many people describe as “the delivery wars” with 67 percent. (I dislike the term.)
An editor once told me it’s lazy to ask questions in headlines, but I dislike that advice, too. So I’ll end this newsletter with another question: Might we be watching the industry’s most drawn-out acquisition?
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