Amazon’s debut of its restaurant delivery service through its one-hour delivery app Prime Now, is no longer looking like an experiment. Since its debut in Seattle this September, the company has been adding support for new cities at a rate of about one per month. Last month, restaurant delivery arrived in Portland, and today it’s going live in L.A. We understand that Amazon is planning to continue a rapid expansion for the service, with more markets coming online later this year and a busy Q1 2016 already in the works. The company’s plan is to bring restaurant delivery to everywhere Prime Now is available.
Prime Now, which offers free, two-hour delivery in major metros, as well as 1-hour delivery for $7.99, is live today in a number of cities across the U.S., including Atlanta, Austin, Baltimore, Chicago, Dallas, Houston, Indianapolis, Las Vegas, L.A. & Orange Country, New York, Miami, Minneapolis & St. Paul, Phoenix, Portland, Sacramento, San Antonio, San Francisco Bay Area, and Seattle & Eastside.
For Amazon, the new restaurant delivery service is ultimately about making the Amazon Prime membership program more appealing to consumers.
The $99 per year program offers free, two-day shipping on more than 20 million items, and now makes more than a million of those items available for free, same-day delivery in these major U.S. cities and surrounding metros. Over the years, Amazon has added a range of exclusives for Amazon Prime members, like free e-books for borrowing, unlimited photo storage in the cloud, a Netflix-live service with free TV shows and movies, a free streaming music service, various deals and discounts, including early access to Black Friday specials, and more.
Restaurant delivery, then, is just one more perk.
In the markets where it’s live today, Seattle and Portland, Amazon has seen a steady increase in repeat usage from Prime members. But more importantly, it hasn’t just seen Prime members adopting the new service – it has also encouraged others to sign up for Amazon Prime.
For the time being, restaurant delivery by itself isn’t a huge boost to Amazon’s bottom line – to encourage sign-ups and use, Amazon is making delivery free for Prime members for a limited time. The service also doesn’t mark up menu item prices, or tack on hidden fees. However, while Amazon aims to keep the service free for some time, it may in the future add on a yet-to-be disclosed fee. Amazon also makes some money through a rev-share model with restaurants, but it doesn’t disclose how much.
The service has a lot of competition in the restaurant delivery space, with Seamless/Grubhub, UberEasts, Eat24, Caviar, Postmates, Sprig, Munchery, and many others. However, what’s more important than beating the competition, is getting customers to join Prime, Amazon believes.
That’s why it keeps adding perks to Prime, and why it hosts big sales events like Amazon Prime Day, its own take on Black Friday sales. Getting Amazon shoppers to convert to Prime customers is the real end game here – analysts have reported previously that Prime members may spend more than double that of non-members. Some believe Amazon may have up to 50 million members worldwide, including 30 to 40 million in the U.S. alone.
In L.A., which launches restaurant delivery today, customers can order from Umami Burger, Baby Blues BBQ, Wokcano, Hurry Curry of Tokyo, Feast from the East, John O’Groats, and others, in addition to Amazon products and grocery items and more from local stores like Sprouts Farmers Market, Bristol Farms, Sprinkles Cupcakes, Erewhon Organic Grocer and 99 Ranch Market.
The L.A. service is live now in select zips, including Santa Monica, Culver City, Venice and west L.A., but will expand to more neighborhoods in the coming days, as well as expand to more restaurants.