Amazon may be taking a huge step into India’s bustling food delivery market, seeking to improve its mixed record in deliveries.
The largest online retailer is in talks to acquire Uber Eats’ operations in India for $300 million, according to a report by the Business Standard.
The negotiations are in the “initial stages” and may lead to a “strategic alliance,” with Amazon India partnering with Catamaran, an investment advisory firm founded by Indian IT industrialist and Infosys co-founder Narayan Murthy, according to the article, which cited unidentified sources.
Amazon’s food delivery record is spotty. The company shuttered its Amazon Restaurants units last month in the U.S. and U.K. The latest deal would give it a share of India’s booming online food delivery sector that has attracted billions of dollars from foreign investors.
India’s online food delivery sales totaled $7.7 billion last year and is expected to reach $12.5 billion in 2023, according to researchers at Statista.
Asia reportedly is Uber’s fastest-growing region and includes three of its top-performing markets — Australia, India and Japan, according to a July Hindu Business Line interview with Raj Beri, head of Uber Eats’ Asia-Pacific region.
“It’s early days for Uber Eats yet, but we are expanding,” he told the paper. Launched in March 2017, Uber Eats grew from six cities to 38, and now works with over 20,000 restaurant partners.
Still, Uber is looking to unload the unit. In February, the company was reportedly in talks with larger Indian rival Swiggy. At the time, India’s Economic Times linked the deal to Uber’s desire to cut losses as it prepared for an IPO.
Uber may be looking to focus on its main business in India, which has a promising ride-share market, investor Anil Joshi told Karma.
“Uber may have deep pockets but its ride-hailing business is equally demanding hence it may be looking to offload non-core business,” said Joshi, founder and managing partner at Unicorn India Ventures.
Cutthroat competition may also be coloring Uber’s decision. Swiggy and Zomato, the top two players in the space, together fulfill over three-quarters of India’s online food orders, accounting for 65% of the market share. Uber Eats is a distant third.
Rising smartphone penetration and increased comfort with online delivery services have spurred the sector’s growth, said Joshi. “The growing consumer appetite for online food delivery is urging companies to pursue heavy spending as they are still in consumer acquisition mode,” he said.
If Amazon completes the deal, it will face significant challenges but may also have advantages because of its ample financial and technological resources. “In the long run only the one with deep pockets and better efficiency will survive,” Joshi said, adding that he expects Amazon to “leverage its Amazon Prime user base to drive food delivery consumption.”