Retail Channels
06 July 2022
Restaurant delivery comes to Prime via Amazon-Grubhub partnership
Here's a look at the implications for the companies, and the market as a whole.

Grubhub is going Prime. (Photo via Grubhub)
Here's a look at the implications for the companies, and the market as a whole.
Grubhub is going Prime. (Photo via Grubhub)
Meal delivery is set to become a Prime benefit.
Amazon and Grubhub announced a new partnership on Wednesday that will include the following:
On the consumer level, the deal is straightforward. Prime members can now receive free meal delivery for a year, just like they receive free shipping on Amazon orders and free access to Prime video.
However, beneath the surface there are plenty of implications for both businesses, and on meal delivery as a whole. Here’s a breakdown:
Amazon is adding meal delivery to its offerings, opening a convenient path to kitchen tables that goes beyond the groceries it currently delivers via Whole Foods. If successful, the deal could make good on a yearslong effort to add a restaurant delivery option.
Amazon has experimented with its own service. In 2015, the company launched Amazon Restaurants to provide food delivery from nearby eateries. It expanded to 20 cities before eventually being shuttered in 2019. A 2019 Geekwire article on that closure detailed other forays:
Amazon has dabbled in food delivery ever since launching grocery delivery service AmazonFresh in Seattle more than a decade ago. The company launched a takeout service in 2014 that let customers use the now-defunct Amazon Local app to order food for pick-up. Amazon then began allowing customers to order food via Amazon Local directly from restaurants, who delivered the meals.
Amazon has also invested in restaurant delivery services before. It took a 16% stake in Deliveroo as a lead investor in a 2020 round worth $575 million that ended up rescuing the UK-based company from the brink of collapse as the pandemic boosted delivery as a whole. Amazon proceeded to sell some of its stake when Deliveroo went public in 2021. Later that year, it started offering Deliveroo’s free-delivery subscription as a Prime benefit in the UK, similar to what it's doing now in the US with Grubhub.
These past examples offer a reminder that Amazon has been here before in other ways. And as Restaurants shows, despite the magnitude of the deal, it could fail.
Still, the upside of the Grubhub deal is enticing. The company already offers delivery of packages and groceries. Now Amazon Prime members can order meals from nearby restaurants within its app.
In a press statement, Amazon VP of Amazon Prime Jamil Ghani called this perk a “thank you” to members.
“The value of a Prime membership continues to grow with this offer,” Ghani said.
Along with boosting use of the service among existing members, it could also help to attract new signups.
For an example of the approach, just look at Prime Day, which also arrives next week. Amazon offers deals to Prime members for the July 12-13 event. In turn, this can inspire new signups for Prime via a 30-day free trial offered during the holiday. If customers stay signed up, they now have incentive to keep spending within Amazon's ecosystem.
Offering free delivery for a year in a service that’s sought by customers in every day life, the Grubhub deal adds an extended perk that makes Amazon relevant for anyone looking to order dinner. While Prime already has an estimated membership of more than 200 million people globally, the company is looking to get back to growth in its retail business after reporting a loss for the first time in 2015. There’s no better place to turn than Prime, which has long been the key cog in making the company’s ecommerce business sticky.
Turning to a broad-based service like meal delivery might hold the best prospect for growing a service that already has massive penetration. Grubhub pointed to a 2021 National Restaurant Association study that showed (53%) of adults – and 64% of millennials – view takeout and food delivery as “essential.” For Amazon, positioning Prime to offer a service of that importance can provide a reason to join that goes beyond shopping and entertainment.
For Grubhub, the benefits lie in being able to tap those existing hordes of Prime members. Extending its subscription service to those customers brings more business to Grubhub. In turn, it makes it more likely that they will get introduced to the service, and keep it past the free trial date.
“Amazon has redefined convenience with Prime and we’re confident this offering will expose many new diners to the value of Grubhub+ while driving more business to our restaurant partners and drivers, said Adam DeWitt, CEO of Grubhub, in a statement.
The company sees plenty of market space in front of it. While food delivery was one of the digital businesses that spiked with the onset of health precautions during the COVID-19 pandemic, the company pointed to an Ipsos statistic that indicated “only” 38% of Americans report using third-party delivery services at least some of the time.
It comes at a time when Grubhub is under particular pressure to grow. According to Bloomberg Second Measure, the company had 13% of market share among food delivery companies as of May 2022. Three years prior, it owned half the market. In the midst of this fall, it was sold to JET in 2021, which in April of this year then said it was exploring a strategic partnership or sale of the company.
Dewitt said at an industry event this spring that adding “channel partners” as a means to get some of its market share back was especially of interest, according to Restaurant Dive. A partnership that embeds it within the largest subscription service in ecommerce would appear to fit that bill.
Even so, JET apparently isn’t done mulling options yet. The company stated that it “continues to actively explore the partial or full sale of Grubhub.” While the milestone targets for customer growth built into the Amazon deal are not detailed, the message seems clear that Grubhub still has work to do to satisfy its own parent, and investors.
While it remains to be seen whether the deal is a success, the announcement of its existence will send a shockwave through the market for food delivery. The signs were already present shortly after the announcement on Wednesday, as CNBC reported that Uber’s stock fell 3%, while DoorDash was down 9%.
Those companies own the top two market share spots for food delivery, having risen by making key moves that Grubhub didn’t. Amazon’s renewed entrance into the space by itself would be enough to send nerves. That it is doing so via partnership with the number three company in the market only compounds the implications.
Uber Eats and DoorDash are both increasingly delivering items beyond meals, as they’ve added availability of products from retail stores beyond restaurants. Uber is planting a flag around local commerce, while DoorDash is expanding its marketplace to include items like office supplies. Now, there may be opportunities for Grubhub to link with the leader in the delivery of general merchandise, at a time when Amazon is testing out ways to involve local retailers in its delivery network. Coming amid speculation that post-pandemic contraction of food delivery could become permanent and instant delivery companies make cuts, the deal could open the opportunity for collaboration to unlock new paths forward in the space, and even ecommerce as a whole. As the partnership evolves, it will be interesting to see whether Grubhub and Amazon end up looking more like each other in the process.
Ask Instacart answers prompts with personalized recommendations.
A pair of recent launches from Instacart highlight how the grocery ecommerce company is integrating two of the key emerging areas of technology into its offerings: Generative AI and marketplaces.
Let’s take a look:
Instacart is seeking to harness generative AI to create a more personalized shopping experience.
A new tool called Ask Instacart that is launching this week is designed to allow customers to type in questions about specific recipes or general recommendations for an occasion. Embedded in the search bar, Ask Instacart also provides personalized questions to be asked by customers. In addition to specific items, it provides information about food preparation, product attributes and dietary considerations.
For those eying how generative AI will play a role in the shopping experience, Ask Instacart shows how search can be transformed into a place for discovery. Instacart is aiming to provide answers to the more open-ended questions that people would naturally ask, not just simply provide info in response to a question that has one answer. It shared the following sample prompts:
The tool is also showing the way for generative AI to integrate with retail media. Ask Instacart is designed to integrate with a brand's sponsored products campaign, so that the answers to questions that match consumer needs can also provide a way for brands to stand out.
To create the tool, Instacart combined the language understanding of ChatGPT with its own AI models. It added in catalog data from 80,000 retail partner locations around the country, which together have more than one billion shoppable items.
Beyond mission: Ecommerce marketplaces have honed a shopping experience where it’s easy to find what you’re looking for. But if shoppers want to happen upon something they didn’t know they needed, social media or the store is still the best place to visit. Instacart is showing how generative AI can make discovery a marketplace function. It also signals that advertising will come to generative AI by way of retail media. Going forward, the growth of discovery could make retail media more valuable as a tool for advertising that raises brand awareness, not just lower-funnel conversions.
Instacart will power a new virtual convenience store for the grocery chain Aldi.
Aldi Express will feature 2,000 of the most-shopped Aldi items, ranging from prepared food and snacks to grocery staples.
Drawing on 2,100 Aldi locations around the country, items will be delivered as fast as 30 minutes, the companies said.
“Through ALDI Express, we’re making shopping more convenient so you can satisfy a craving or get a missing ingredient in minutes,” said Scott Patton, VP of National Buying at ALDI, in a statement. “Together with Instacart, we’ll continue to find ways to innovate and make the online grocery experience even more effortless and accessible.”
Aldi began offering delivery via Instacart in 2017, and has since expanded services to include pickup as well as alcohol delivery.
Aldi’s marketplace moment? While Aldi previously offered delivery, making the assortment available through a virtual store offers the opportunity to create a marketplace for its goods. With the virtual store, it will more closely resemble DoorDash and Uber Eats, which have been expanding their grocery assortment. With a marketplace, additional revenue opportunities could open up for the grocer, such as advertising through retail media.