Amazon (AMZN) is beefing up its food-delivery perks through its Prime service and expanding its partnership with Grubhub as retailers intensify competition for subscription revenue and bundled services.
Prime members will get free access to Grubhub+, a $120-a-year subscription service that includes free delivery on eligible orders and discounts on service fees. Amazon customers and Prime members can also order from Grubhub directly through Amazon's website and app, the company announced late Wednesday.
The Grubhub deal will bolster Amazon's food offering, which operates across multiple segments, including Amazon's traditional network for delivering non-perishable foods, grocery delivery through AmazonFresh, Whole Foods and other retailers, and takeout through Grubhub. On Amazon's most recent earnings call, CEO Andy Jassy said both the non-perishable food and grocery businesses are growing.
Amazon is promoting more than 300 million products that come with free Prime shipping. (AP Photo/David Zarbowski) (AP)
“Amazon already offers a lot of value, but as more retailers develop their own loyalty and membership programs, it needs to continue to push the envelope,” said Neil Saunders, retail analyst at GlobalData. “It's also a way for Amazon to become a one-stop shop for your grocery needs.”
The Grubhub perk builds on and expands on previous trial offers and underscores Amazon's efforts to make Prime a comprehensive membership program.
“Prime is focused on convenience, savings, entertainment and health, and we're deepening our partnership with Grubhub to focus on food delivery, making Prime a simple membership experience to meet all the needs and wants of busy families across the country,” Jamil Ghani, vice president of Amazon Prime, said in an interview with Yahoo Finance.
Ghani declined to comment on the possibility of Amazon acquiring Grubhub. The original partnership between Amazon and Grubhub announced in 2022 included an option for Amazon to exercise warrants to acquire a 2% stake in Grubhub, as well as an option to exercise additional warrants to acquire up to an additional 13%.
“I don't think an acquisition is on the table at this time, but there may be interest in the future,” Sanders said. “Amazon is currently focused on driving efficiencies across its business rather than large scale transactions. To do a deal, Amazon would need to be convinced it could add value to Grubhub and parent company Just Eat.”
Ghani said the company sees the Grubhub deal as part of a drive to increase the value of Prime, which began as an untested free-delivery service in 2005 and has grown into an e-commerce behemoth with membership perks expanding to include streaming, music, medical services, Thursday night football and takeout.
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Previously, Amazon offered Prime members a one-year Grubhub+ trial before becoming a paid member. Under the new arrangement, Prime members can simply activate an ongoing Grubhub+ offer to get the free ongoing benefits.
For Grubhub, owned by Just Eat Takeaway.com Inc (TKWY.AS), the partnership is a way to grow its membership base and earn more commission from restaurants, Sanders said.
Just Eat shares are down nearly 14% this year, lagging behind rivals DoorDash (DASH) and Uber (UBER), whose shares have risen 16% and 11%, respectively. Even as customers flock to food-delivery services during the pandemic, the company's business model continues to face questions about the sustainable profitability of its business.
Amazon's shares have risen more than 20% this year, outperforming the Nasdaq Composite Index's (^IXIC) 15% gain.
Hamza Shaaban is a reporter covering markets and economics for Yahoo Finance. Follow Hamza on Twitter. translation:.
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